Fannie Mae 2014 Annual Report Download - page 69

64
In recent years, the Federal Reserve has purchased a significant amount of mortgage-backed securities issued by us, Freddie
Mac and Ginnie Mae. The Federal Reserve began to taper these purchases in January 2014 and concluded its asset purchase
program in October 2014. In announcing the conclusion of its asset purchase program, the Federal Reserve stated that it is
maintaining its existing policy of reinvesting principal payments from its holdings of agency debt and agency mortgage-
backed securities in agency mortgage-backed securities; therefore, it has continued to purchase a significant amount of
agency mortgage-backed securities. Any change in the Federal Reserve’s policy towards the reinvestment of principal
payments of mortgage-backed securities, or possible future sales of mortgage-backed securities by the Federal Reserve, could
result in increases in mortgage interest rates and adversely affect our business volume, which could adversely affect our
results of operations and financial condition.
The Dodd-Frank Act and regulatory changes in the financial services industry may negatively impact our business.
The Dodd-Frank Act has significantly changed the regulation of the financial services industry. This legislation is affecting
and will continue to affect many aspects of our business and could affect us in substantial and unforeseeable ways. The
Dodd-Frank Act and related regulatory changes have required us to change certain business practices, limit the types of
products we offer and incur additional costs. Additionally, implementation of this legislation has resulted in and will continue
to result in increased supervision and more comprehensive regulation of our customers and counterparties in the financial
services industry, which may have a significant impact on the business practices of our customers and counterparties, as well
as on our counterparty credit risk. The Dodd-Frank Act’s impact on our customers’ and counterparties’ business practices
could indirectly adversely affect our business. For example, if our customers reduce the amount of their mortgage
originations, it would adversely affect the number of mortgages available for us to purchase or guarantee.
Examples of aspects of the Dodd-Frank Act and related regulatory changes that have affected us or may affect us in the future
include: rules requiring the clearing of certain derivatives transactions and margin and capital rules for uncleared derivative
trades, which impose additional costs on us; the CFPB’s “ability to repay” rule, which has limited the types of products we
offer and could impact the volume of loans sold to us in the future; and the development of single-counterparty credit limit
regulations, which could cause our customers to change their business practices. We could also be designated as a
systemically important nonbank financial company subject to supervision and regulation by the Federal Reserve. If this were
to occur, the Federal Reserve would have the authority to examine us and could impose stricter prudential standards on us,
including risk-based capital requirements, leverage limits, liquidity requirements, single-counterparty exposure limits,
resolution plan and credit exposure reporting requirements, overall risk management requirements, contingent capital
requirements, enhanced public disclosures and short-term debt limits. We have not received any notification of possible
designation as a systemically important financial institution.
In addition, the actions of Treasury, the Commodity Futures Trading Commission, the SEC, the FDIC, the Federal Reserve
and international central banking authorities directly or indirectly impact financial institutions’ cost of funds for lending,
capital-raising and investment activities, which could increase our borrowing costs or make borrowing more difficult for us.
Changes in monetary policy are beyond our control and difficult to anticipate.
Overall, these legislative and regulatory changes could affect us in substantial and unforeseeable ways and could have a
material adverse effect on our business, results of operations, financial condition, liquidity and net worth.
Legislative, regulatory or judicial actions could negatively impact our business, results of operations, financial condition
or net worth.
Legislative, regulatory or judicial actions at the federal, state or local level could negatively impact our business, results of
operations, financial condition or net worth. Legislative, regulatory or judicial actions could affect us in a number of ways,
including by imposing significant additional costs on us and diverting management attention or other resources. For example,
we could be affected by legislative or regulatory changes that expand the responsibilities and liabilities of servicers and
assignees for maintaining vacant properties prior to foreclosure, which could increase our costs. We also could be affected by
state laws and court decisions granting priority rights for homeowners associations in foreclosure proceedings, which could
adversely affect our ability to recover our losses on affected loans. In addition, as described above, our business could be
materially adversely affected by legislative and regulatory actions relating to housing finance reform or the financial services
industry or by legal or regulatory proceedings.
The occurrence of a major natural or other disaster in the United States could negatively impact our credit losses and
credit-related expenses, and could disrupt our business operations in the affected geographic area or nationally.
We conduct our business in the residential and multifamily mortgage markets and own or guarantee the performance of
mortgage loans throughout the United States. The occurrence of a major natural or environmental disaster, terrorist attack,
cyber attack, pandemic, or similar event (a “major disruptive event”) in a regional geographic area of the United States could