Fannie Mae 2014 Annual Report Download - page 7

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EXECUTIVE SUMMARY
Please read this Executive Summary together with our MD&A and our consolidated financial statements as of December 31,
2014 and related notes to the consolidated financial statements.
Our Strategy
We are focused on:
• achieving strong financial and credit performance;
• supporting the housing recovery by providing reliable, large-scale access to affordable mortgage credit for qualified
borrowers and helping struggling homeowners;
• serving customer needs and improving our business efficiency; and
• helping to build a sustainable housing finance system.
Achieving strong financial and credit performance
We continued to achieve strong financial and credit performance in 2014:
• Financial Performance. We reported net income of $14.2 billion and pre-tax income of $21.1 billion in 2014,
compared with net income of $84.0 billion and pre-tax income of $38.6 billion in 2013. See “Summary of Our
Financial Performance” below for an overview of our 2014 financial performance. We expect to remain profitable
on an annual basis for the foreseeable future; however, certain factors, such as changes in interest rates or home
prices, could result in significant volatility in our financial results from quarter to quarter or year to year. For more
information regarding our expectations for our future financial performance, see “Outlook—Financial Results” and
“Outlook—Revenues” below.
• Dividend Payments to Treasury. With our expected March 2015 dividend payment to Treasury, we will have paid a
total of $136.4 billion in dividends to Treasury on our senior preferred stock. The aggregate amount of draws we
have received from Treasury to date under the senior preferred stock purchase agreement is $116.1 billion. Under
the terms of the senior preferred stock purchase agreement, dividend payments do not offset prior Treasury draws.
See “Treasury Draws and Dividend Payments” and “Outlook—Dividend Obligations to Treasury” below for more
information regarding our dividend payments to Treasury.
• Book of Business and Credit Performance. Beginning in 2008, we made changes to strengthen our underwriting and
eligibility standards that have improved the credit quality of our single-family guaranty book of business, and
contributed to improvement in our credit performance. Our single-family serious delinquency rate has decreased
each quarter since the first quarter of 2010, and was 1.89% as of December 31, 2014, compared with 2.38% as of
December 31, 2013. Single-family seriously delinquent loans are loans that are 90 days or more past due or in the
foreclosure process. See “Single-Family Guaranty Book of Business” below for information on the credit
performance of the mortgage loans in our single-family guaranty book of business and on our single-family
acquisitions for each of the last five years.
Our business model has changed significantly since we entered into conservatorship in 2008 and continues to evolve. To meet
the requirements of our senior preferred stock purchase agreement with Treasury, our retained mortgage portfolio has
declined substantially since entering conservatorship and will continue to decline until 2018, which has resulted in, and is
expected to continue to result in, declines in our revenues from our retained mortgage portfolio assets. In addition, the
amount of guaranty fee income we receive for managing the credit risk of loans in our book of business has increased
significantly since entering into conservatorship and we expect will continue to increase. See “Outlook—Revenues” for more
information on the shift in, and future expectations regarding, the sources of our revenue. Our business also continues to
evolve as a result of our efforts to build a safer and sustainable housing finance system and to pursue the strategic goals
identified by our conservator. For example, we have begun to transfer a portion of the existing credit risk on our single-family
guaranty book of business in order to reduce the risk to taxpayers of future borrower defaults, and we expect to continue
engaging in economically sensible ways to expand our offerings of credit risk transfer transactions in the future. See “Helping
to Build a Sustainable Housing Finance System” for a discussion of our credit risk transfer transactions and other efforts to
build a safer and sustainable housing finance system.
We remain under conservatorship and subject to the restrictions of the senior preferred stock purchase agreement with
Treasury. As a result of the senior preferred stock purchase agreement and directives from our conservator, we are not
permitted to retain our net worth (other than a limited amount that will decrease to zero by 2018), rebuild our capital position