FannieMae 2014 8K


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
 
FORM 8-K
 
CURRENT REPORT
Pursuant to Section 13 or 15(d) of The Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): February 20, 2015
 
Federal National Mortgage Association
(Exact name of registrant as specified in its charter)
 
 
 
 
 
 
Federally chartered corporation
 
000-50231
 
52-0883107
(State or other jurisdiction
of incorporation)
 
(Commission
File Number)
 
(IRS Employer
Identification Number)
 
 
 
 
 
 
 
3900 Wisconsin Avenue, NW
Washington, DC
 
20016
(Address of principal executive offices)
 
(Zip Code)
Registrant’s telephone number, including area code: 202-752-7000
(Former Name or Former Address, if Changed Since Last Report): ______________
 
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
o
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
o
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
o
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
o
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))





The information in this report, including information in the exhibits submitted herewith, shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, or otherwise subject to the liabilities of Section 18, nor shall it be deemed incorporated by reference into any disclosure document relating to Fannie Mae (formally known as the Federal National Mortgage Association), except to the extent, if any, expressly incorporated by specific reference in that document.

Item 2.02 Results of Operations and Financial Condition.
On February 20, 2015, Fannie Mae filed its annual report on Form 10-K for the year ended December 31, 2014 and issued a news release reporting its financial results for the periods covered by the Form 10-K. The news release, a copy of which is furnished as Exhibit 99.1 to this report, is incorporated herein by reference.
Item 7.01 Regulation FD Disclosure.
On February 20, 2015, Fannie Mae posted to its Web site a 2014 Credit Supplement presentation consisting primarily of information about Fannie Mae’s guaranty book of business. The presentation, a copy of which is furnished as Exhibit 99.2 to this report, is incorporated herein by reference. Fannie Mae’s Web site address is www.fanniemae.com. Information appearing on the company’s Web site is not incorporated into this report.
Item 9.01 Financial Statements and Exhibits.
(d) Exhibits. The exhibit index filed herewith is incorporated herein by reference.





SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
 
 
 
 
 
 
FEDERAL NATIONAL MORTGAGE ASSOCIATION
 
 
 
 
By
/s/ David C. Benson
 
 
David C. Benson
 
 
Executive Vice President and
Chief Financial Officer
Date: February 20, 2015





EXHIBIT INDEX
The following exhibits are submitted herewith:
 
 
 
 
Exhibit Number
  
Description of Exhibit
99.1

  
News release, dated February 20, 2015
99.2

  
2014 Credit Supplement presentation, dated February 20, 2015



FannieMae 2014 10K Press Release

Resource Center: 1-800-732-6643
Exhibit 99.1
Contact:     Pete Bakel
202-752-2034
Date:    February 20, 2015

Fannie Mae Reports Net Income of $14.2 Billion and
Comprehensive Income of $14.7 Billion for 2014

Company Reports Net Income of $1.3 Billion and
Comprehensive Income of $1.3 Billion for Fourth Quarter 2014


Fannie Mae reported annual net income for 2014 of $14.2 billion and comprehensive income of $14.7 billion. Fannie Mae reported net income of $1.3 billion and comprehensive income of $1.3 billion for the fourth quarter of 2014.
Fannie Mae paid a total of $20.6 billion in dividends to Treasury in 2014. The company expects to pay Treasury $1.9 billion in dividends in March 2015. With the expected March 2015 dividend payment, the company will have paid a total of $136.4 billion in dividends to Treasury. Dividend payments do not reduce prior Treasury draws, which total $116.1 billion since 2008.
Fannie Mae provided approximately $434 billion in liquidity to the mortgage market in 2014, including approximately $128 billion in liquidity in the fourth quarter of 2014, enabling families to buy, refinance, or rent homes.
Fannie Mae helped distressed families retain their homes or avoid foreclosure through approximately 165,000 workout solutions in 2014, including approximately 34,000 loan workouts during the fourth quarter of 2014.

WASHINGTON, DC — Fannie Mae (FNMA/OTC) reported annual net income of $14.2 billion and annual comprehensive income of $14.7 billion in 2014. This compares to net income of $84.0 billion and comprehensive income of $84.8 billion in 2013, which included the release of the company’s valuation allowance against its deferred tax assets. Fannie Mae’s 2014 results were driven by strong revenues from net interest income and income from settlement agreements related to private-label mortgage-related securities sold to Fannie Mae, as well as credit-related income due primarily to increasing home prices during the year. These results were partially offset by a provision for federal income taxes and fair value losses on risk management derivatives due to declines in longer-term interest rates in 2014.
Fannie Mae recognized a provision for federal income taxes of $6.9 billion for the year ended 2014, which resulted in an effective tax rate of 32.8 percent.
Fannie Mae’s net income of $1.3 billion and comprehensive income of $1.3 billion for the fourth quarter of 2014 compares to net income of $3.9 billion and comprehensive income of $4.0 billion for the third quarter of 2014. Fannie Mae’s fourth quarter results were driven by net interest income, partially offset by fair value losses on risk management derivatives due to declines in longer-term interest rates in the quarter. The company reported a positive net worth of $3.7 billion as of December 31, 2014, resulting in a dividend obligation to Treasury of $1.9 billion, which the company expects to pay in March 2015.


Fourth Quarter and Full Year 2014 Results
1


“Fannie Mae had another strong year of financial performance. We continued to manage our business effectively, put the legacy issues from the financial crisis behind us, and implement innovations to lead the industry toward a sustainable housing finance system for today and the future,” said Timothy J. Mayopoulos, president and chief executive officer. “We are committed to serving our partners and focused on reducing barriers to lending to qualified borrowers.”
SUMMARY OF FOURTH QUARTER AND FULL YEAR 2014 RESULTS
(Dollars in millions)
 
4Q14
 
3Q14
 
Variance
 
FY 2014
 
FY 2013
 
Variance
Net interest income
 
$
5,142

 
$
5,184

 
$
(42
)
 
$
19,968

 
$
22,404

 
$
(2,436
)
Fee and other income
 
323

 
826

 
(503
)
 
5,887

 
3,930

 
1,957

Net revenues
 
5,465

 
6,010

 
(545
)
 
25,855

 
26,334

 
(479
)
Investment gains, net
 
187

 
177

 
10

 
936

 
1,127

 
(191
)
Fair value (losses) gains, net
 
(2,502
)
 
(207
)
 
(2,295
)
 
(4,833
)
 
2,959

 
(7,792
)
Administrative expenses
 
(702
)
 
(706
)
 
4

 
(2,777
)
 
(2,545
)
 
(232
)
Credit-related income
 
 
 
 
 
 
 
 
 
 
 
 
Benefit for credit losses
 
466

 
1,085

 
(619
)
 
3,964

 
8,949

 
(4,985
)
Foreclosed property (expense) income
 
(369
)
 
(249
)
 
(120
)
 
(142
)
 
2,839

 
(2,981
)
Total credit-related income
 
97

 
836

 
(739
)
 
3,822

 
11,788

 
(7,966
)
Other non-interest expenses(1)
 
(415
)
 
(418
)
 
3

 
(1,853
)
 
(1,096
)
 
(757
)
Net (losses) gains and (expense) income
 
(3,335
)
 
(318
)
 
(3,017
)
 
(4,705
)
 
12,233

 
(16,938
)
Income before federal income taxes
 
2,130

 
5,692

 
(3,562
)
 
21,150

 
38,567

 
(17,417
)
(Provision) benefit for federal income taxes
 
(818
)
 
(1,787
)
 
969

 
(6,941
)
 
45,415

 
(52,356
)
Net income
 
1,312

 
3,905

 
(2,593
)
 
14,209

 
83,982

 
(69,773
)
Less: Net (income) attributable to the noncontrolling interest
 

 

 

 
(1
)
 
(19
)
 
18

Net income attributable to Fannie Mae
 
$
1,312

 
$
3,905

 
$
(2,593
)
 
$
14,208

 
$
83,963

 
$
(69,755
)
Total comprehensive income attributable to Fannie Mae
 
$
1,335

 
$
4,000

 
$
(2,665
)
 
$
14,738

 
$
84,782

 
$
(70,044
)
Dividends distributed or available for distribution to senior preferred stockholder
 
$
(1,920
)
 
$
(3,999
)
 
$
2,079

 
$
(15,323
)
 
$
(85,419
)
 
$
70,096

(1) Consists of TCCA fees, debt extinguishment gains, net and other expenses.
Net revenues, which consist of net interest income and fee and other income, were $5.5 billion for the fourth quarter of 2014, compared with $6.0 billion for the third quarter of 2014. For the year, net revenues were $25.9 billion, compared with $26.3 billion in 2013.
Net interest income, which includes guaranty fee revenue, was $5.1 billion for the fourth quarter of 2014, compared with $5.2 billion for the third quarter of 2014. For the year, net interest income was $20.0 billion for 2014, compared with $22.4 billion for 2013. The decrease in net interest income compared to 2013 was due primarily to lower interest income from retained mortgage portfolio assets due to a decline in the size of the company’s retained mortgage portfolio, partially offset by an increase in net interest income from guaranty fees.
An increasing portion of Fannie Mae’s net interest income in recent years has been derived from guaranty fees rather than from interest income earned on the company’s retained mortgage portfolio assets. This is a result of both the shrinking of the retained mortgage portfolio and the impact of guaranty fee increases.

Fourth Quarter and Full Year 2014 Results
2


The company estimates that the percentage of net interest income derived from guaranty fees on loans underlying Fannie Mae MBS increased to approximately half in 2014, compared with more than one-third in 2013. The company expects that guaranty fees will continue to account for an increasing portion of its net interest income.
Fee and other income was $323 million for the fourth quarter of 2014, compared with $826 million for the third quarter of 2014. Fee and other income decreased in the fourth quarter compared with the third quarter due to income recognized by the company in the third quarter of 2014 from settlement agreements related to private-label mortgage-related securities sold to Fannie Mae. For the year, fee and other income was $5.9 billion for 2014, compared with $3.9 billion for 2013. The increase in fee and other income for the year was due primarily to an increase in the amount of income recognized by the company from settlement agreements related to private-label mortgage-related securities sold to Fannie Mae.
Credit-related income, which consists of a benefit for credit losses and foreclosed property expense or income, was $97 million in the fourth quarter of 2014, compared with $836 million in the third quarter of 2014. Credit-related income decreased in the fourth quarter of 2014 compared with the third quarter of 2014 primarily driven by relatively flat home prices in the fourth quarter compared with home prices increasing in the third quarter. For the year, credit-related income was $3.8 billion, compared with $11.8 billion in 2013. The decline in credit-related income for 2014 was primarily attributable to home prices increasing at a slower pace in 2014 as compared with 2013. In addition, 2013 benefited from foreclosed property income primarily due to the recognition of income related to compensatory fee agreements.

Fourth Quarter and Full Year 2014 Results
3


Net fair value losses were $2.5 billion in the fourth quarter of 2014, compared with $207 million in the third quarter of 2014. For the year, net fair value losses were $4.8 billion, compared with net fair value gains of $3.0 billion in 2013. The company recorded fair value losses in the fourth quarter and full year of 2014 due primarily to declines in longer-term interest rates negatively impacting the value of the company’s risk management derivatives. The estimated fair value of the company’s derivatives and securities may fluctuate substantially from period to period because of changes in interest rates, the yield curve, mortgage spreads, implied volatility, and activity related to these financial instruments.
VARIABILITY OF FINANCIAL RESULTS
Fannie Mae expects to remain profitable on an annual basis for the foreseeable future; however, the company expects its earnings in future years will be substantially lower than its earnings for 2014, due primarily to the company’s expectation of substantially lower income from resolution agreements, continued declines in net interest income from its retained mortgage portfolio assets, and lower credit-related income. In addition, certain factors, such as changes in interest rates or home prices, could result in significant volatility in the company’s financial results from quarter to quarter or year to year. Fannie Mae’s future financial results also will be affected by a number of other factors, including: the company’s guaranty fee rates; the volume of single-family mortgage originations in the future; the size, composition, and quality of its retained mortgage portfolio and guaranty book of business; and economic and housing market conditions. The company’s expectations for its future financial results do not take into account the impact on its business of potential future legislative or regulatory changes, which could have a material impact on the company’s financial results, particularly the enactment of housing finance reform legislation. For additional information on factors that affect the company’s financial results, please refer to “Executive Summary” in the company’s annual report on Form 10-K for the year ended December 31, 2014 (the “2014 Form 10-K”).
SUMMARY OF FOURTH QUARTER AND FULL YEAR 2014 BUSINESS SEGMENT RESULTS
The business groups running Fannie Mae’s three reporting segments – its Single-Family business, its Multifamily business, and its Capital Markets group – engage in complementary business activities in pursuing the company’s goals of providing liquidity to the market, expanding access to credit, and helping the U.S. housing market recover.

Fourth Quarter and Full Year 2014 Results
4


(Dollars in millions)
4Q14
 
3Q14
 
Variance
 
2014
 
2013
 
Variance
Single-Family Segment:
 
 
 
 
 
 
 
 
 
 
 
Guaranty fee income
$
2,994

 
$
2,945

 
$
49

 
$
11,702

 
$
10,468

 
$
1,234

Credit-related income
94

 
748

 
(654
)
 
3,625

 
11,205

 
(7,580
)
Other
(875
)
 
(794
)
 
(81
)
 
(3,352
)
 
(2,507
)
 
(845
)
Income before federal income taxes
2,213

 
2,899

 
(686
)
 
11,975

 
19,166

 
(7,191
)
(Provision) benefit for federal income taxes
(599
)
 
(837
)
 
238

 
(3,496
)
 
29,110

 
(32,606
)
Net income
$
1,614

 
$
2,062

 
$
(448
)
 
$
8,479

 
$
48,276

 
$
(39,797
)
Multifamily Segment:
 
 
 
 
 
 
 
 
 
 
 
Guaranty fee income
$
337

 
$
332

 
$
5

 
$
1,297

 
$
1,217

 
$
80

Credit-related income
3

 
88

 
(85
)
 
197

 
583

 
(386
)
Other
154

 
1

 
153

 
127

 
345

 
(218
)
Income before federal income taxes
494

 
421

 
73

 
1,621

 
2,145

 
(524
)
(Provision) benefit for federal income taxes
(121
)
 
(37
)
 
(84
)
 
(158
)
 
7,924

 
(8,082
)
Net income
$
373

 
$
384

 
$
(11
)
 
$
1,463

 
$
10,069

 
$
(8,606
)
Capital Markets Segment:
 
 
 
 
 
 
 
 
 
 
 
Net interest income
$
1,651

 
$
1,845

 
$
(194
)
 
$
7,243

 
$
9,764

 
$
(2,521
)
Investment gains, net
1,878

 
1,516

 
362

 
6,378

 
4,847

 
1,531

Fair value (losses) gains, net
(2,706
)
 
(335
)
 
(2,371
)
 
(5,476
)
 
3,148

 
(8,624
)
Other
(277
)
 
169

 
(446
)
 
3,256

 
1,383

 
1,873

Income before federal income taxes
546

 
3,195

 
(2,649
)
 
11,401

 
19,142

 
(7,741
)
(Provision) benefit for federal income taxes
(98
)
 
(913
)
 
815

 
(3,287
)
 
8,381

 
(11,668
)
Net income
$
448

 
$
2,282

 
$
(1,834
)
 
$
8,114

 
$
27,523

 
$
(19,409
)
Single-Family Business
Single-Family net income was $1.6 billion in the fourth quarter of 2014, compared with $2.1 billion in the third quarter of 2014. The decrease in net income in the fourth quarter compared to the third quarter was driven by lower credit-related income. For the year, the Single-Family business had net income of $8.5 billion, compared with $48.3 billion in 2013. The decrease in annual net income was due primarily to the release of the company’s valuation allowance against its deferred tax assets in 2013, as well as a decrease in credit-related income, partially offset by an increase in guaranty fee income.
Single-Family guaranty fee income was $11.7 billion in 2014, compared with $10.5 billion in 2013. Single-Family guaranty fee income increased in 2014 compared with 2013 as loans with higher guaranty fees have become a larger part of the company’s Single-Family guaranty book of business due to the cumulative impact of guaranty fee price increases implemented in 2012. The Single-Family guaranty book of business was $2.85 trillion as of December 31, 2014 and September 30, 2014 and $2.89 trillion as of December 31, 2013.
Single-Family credit-related income was $94 million in the fourth quarter of 2014, compared with $748 million in the third quarter of 2014. The decrease in credit-related income in the fourth quarter compared to the third quarter was due primarily to home prices remaining relatively flat in the quarter compared with increases in home prices in the third quarter. For the year, Single-

Fourth Quarter and Full Year 2014 Results
5


Family credit-related income was $3.6 billion, compared with $11.2 billion in 2013. The decrease in annual credit-related income was due primarily to slower home price appreciation in 2014 as compared with 2013. In addition, 2013 Single-Family credit-related income benefited from foreclosed property income due primarily to the recognition of income related to compensatory fee arrangements.
Multifamily Business
Multifamily net income was $373 million in the fourth quarter of 2014, compared with $384 million in the third quarter of 2014. The decrease in net income in the fourth quarter compared to the third quarter was driven primarily by a decrease in credit-related income and an increase in the provision for federal income taxes, offset by an increase in gains from sales of partnership investments. For the year, Multifamily net income was $1.5 billion, compared with $10.1 billion in 2013. The decline in annual net income was due primarily to the release of the company’s valuation allowance against its deferred tax assets in 2013, as well as a decrease in credit-related income in 2014 compared with 2013.
Multifamily guaranty fee income was $337 million for the fourth quarter of 2014, compared with $332 million for the third quarter of 2014. For the year, Multifamily guaranty fee income was $1.3 billion in 2014 compared with $1.2 billion in 2013. Multifamily guaranty fee income increased in 2014 compared with 2013 as loans with higher guaranty fees have become a larger part of the company’s Multifamily guaranty book of business, while loans with lower guaranty fees continue to liquidate. The Multifamily guaranty book of business was $203.3 billion as of December 31, 2014, compared with $200.2 billion as of September 30, 2014 and $200.6 billion as of December 31, 2013.
Multifamily credit-related income was $3 million for the fourth quarter of 2014, compared with $88 million for the third quarter of 2014. The decrease in credit-related income in the fourth quarter compared to the third quarter was driven primarily by smaller improvements in property valuations. For the year, Multifamily credit-related income was $197 million compared with $583 million in 2013. The decline was due primarily to smaller improvements in property valuations in 2014 compared with 2013, as well as improvements in loss severity trends in 2013.
Capital Markets
Capital Markets net income was $448 million in the fourth quarter of 2014, compared with $2.3 billion in the third quarter of 2014. The decrease in net income in the fourth quarter was driven primarily by fair value losses on the company’s risk management derivatives. The group had net income of $8.1 billion for the year, compared with $27.5 billion for 2013. The decline in annual net income was due primarily to the release of the company’s valuation allowance against its deferred tax assets in 2013, the recognition of fair value losses in 2014 compared to fair value gains in 2013, and a decline in net interest income. These declines were partially offset by increases in both other income and investment gains.
Capital Markets net interest income was $1.7 billion for the fourth quarter of 2014, compared with $1.8 billion for the third quarter of 2014. For the year, Capital Markets net interest income was $7.2 billion compared with $9.8 billion in 2013. The decrease in annual net interest income was due primarily to a decline in the average balance of the company’s retained mortgage portfolio.

Fourth Quarter and Full Year 2014 Results
6


Capital Markets other losses was $277 million for the fourth quarter of 2014, compared with other income of $169 million for the third quarter of 2014. For the year, Capital Markets other income was $3.3 billion compared with $1.4 billion in 2013. The increase in annual other income was due to an increase in the amount of income recognized from settlement agreements related to private-label mortgage-backed securities sold to Fannie Mae.
Capital Markets net investment gains were $1.9 billion in the fourth quarter of 2014, compared with $1.5 billion in the third quarter of 2014. For the year, Capital Markets net investment gains were $6.4 billion compared with $4.8 billion in 2013. The increase in annual net investment gains was due primarily to higher gains on the sale of Fannie Mae MBS available-for-sale securities driven by a decline in interest rates in 2014.
Capital Markets net fair value losses were $2.7 billion in the fourth quarter of 2014, compared with $335 million in the third quarter of 2014. For the year, Capital Markets net fair value losses were $5.5 billion compared with fair value gains of $3.1 billion in 2013. Net fair value losses for the fourth quarter and the year were due to fair value losses on risk management derivatives driven by declines in longer-term interest rates during the period.
Capital Markets retained mortgage portfolio balance decreased to $413.3 billion as of December 31, 2014, compared with $490.7 billion as of December 31, 2013, resulting from purchases of $178.3 billion and liquidations and sales of $255.7 billion during the year.
BUILDING A SUSTAINABLE HOUSING FINANCE SYSTEM
In addition to continuing to provide liquidity and support to the mortgage market, Fannie Mae has invested significant resources toward helping to maintain a safer and sustainable housing finance system for today and build a safer and sustainable housing finance system for the future. The company is pursuing the strategic goals identified by its conservator, the Federal Housing Finance Agency (“FHFA”). These strategic goals are: maintain, in a safe and sound manner, credit availability and foreclosure prevention activities for new and refinanced mortgages to foster liquid, efficient, competitive, and resilient national housing finance markets; reduce taxpayer risk through increasing the role of private capital in the mortgage market; and build a new single-family securitization infrastructure for use by Fannie Mae and Freddie Mac and adaptable for use by other participants in the secondary market in the future.
ABOUT FANNIE MAE’S CONSERVATORSHIP
Fannie Mae has operated under the conservatorship of FHFA since September 6, 2008. Fannie Mae has not received funds from Treasury since the first quarter of 2012. The funding the company has received under its senior preferred stock purchase agreement with Treasury has provided the company with the capital and liquidity needed to fulfill its mission of providing liquidity and support to the nation’s housing finance markets and to avoid a trigger of mandatory receivership under the Federal Housing Finance Regulatory Reform Act of 2008. For periods through December 31, 2014, Fannie Mae has requested cumulative draws totaling $116.1 billion and paid $134.5 billion in dividends to Treasury. Under the senior preferred stock purchase agreement, the payment of dividends does not offset prior draws. As a result, Treasury maintains a liquidation preference of $117.1 billion on the company’s senior preferred stock.

Fourth Quarter and Full Year 2014 Results
7


Treasury Draws and Dividend Payments
(1) 
Treasury draw requests are shown in the period for which requested and do not include the initial $1.0 billion liquidation preference of Fannie Mae’s senior preferred stock, for which Fannie Mae did not receive any cash proceeds. The payment of dividends does not offset prior Treasury draws.
(2) 
Fannie Mae expects to pay a dividend for the first quarter of 2015 calculated based on the company’s net worth of $3.7 billion as of December 31, 2014 less a capital reserve amount of $1.8 billion.
(3) 
Amounts may not sum due to rounding.
In August 2012, the terms governing the company’s dividend obligations on the senior preferred stock were amended. The amended senior preferred stock purchase agreement does not allow the company to build a capital reserve. Beginning in 2013, the required senior preferred stock dividends each quarter equal the amount, if any, by which the company’s net worth as of the end of the immediately preceding fiscal quarter exceeds an applicable capital reserve amount. The capital reserve amount was $2.4 billion for each quarterly dividend period in 2014, decreased to $1.8 billion for dividend periods in 2015 and will continue to be reduced by $600 million each year until it reaches zero on January 1, 2018.
The amount of remaining funding available to Fannie Mae under the senior preferred stock purchase agreement with Treasury is currently $117.6 billion. If the company were to draw additional funds from Treasury under the agreement in a future period, the amount of remaining funding under the agreement would be reduced by the amount of the company’s draw. Dividend payments Fannie Mae makes to Treasury do not restore or increase the amount of funding available to the company under the agreement.
Fannie Mae is not permitted to redeem the senior preferred stock prior to the termination of Treasury’s funding commitment under the senior preferred stock purchase agreement. The limited circumstances under which Treasury’s funding commitment will terminate are described in “Business—Conservatorship and Treasury Agreements” in the company’s 2014 Form 10-K.
CREDIT QUALITY
While continuing to make it possible for families to purchase, refinance, or rent homes, Fannie Mae has maintained responsible credit standards. Since 2009, Fannie Mae has seen the effect of the actions it took, beginning in 2008, to significantly strengthen its underwriting and eligibility standards and change its pricing to promote sustainable homeownership and stability in the housing market. Single-family conventional loans acquired by Fannie Mae in 2014 had a weighted average borrower FICO credit score at origination of 744 and a weighted average original loan-to-value ratio of 77 percent.
Fannie Mae’s single-family conventional guaranty book of business as of December 31, 2014 consisted of single-family loans acquired prior to 2009; non-Refi PlusTM loans acquired beginning in 2009; loans acquired through the Administration’s Home Affordable Refinance Program® (“HARP®”); and other loans

Fourth Quarter and Full Year 2014 Results
8


acquired pursuant to the company’s Refi Plus initiative, excluding HARP loans. The company’s Refi Plus initiative, which started in April 2009 and includes HARP, provides expanded refinance opportunities for eligible Fannie Mae borrowers, and may involve the refinance of existing Fannie Mae loans with high loan-to-value ratios, including loans with loan-to-value ratios in excess of 100 percent.
The single-family serious delinquency rate for Fannie Mae’s book of business has declined for 19 consecutive quarters since the first quarter of 2010, and was 1.89 percent as of December 31, 2014, compared with 5.47 percent as of March 31, 2010. This decline is primarily the result of home retention solutions, foreclosure alternatives and completed foreclosures, improved loan payment performance, as well as the company’s acquisition of loans with stronger credit profiles since the beginning of 2009. Although Fannie Mae’s single-family serious delinquency rate has declined, the pace of declines has slowed in recent months and the company expects this trend to continue. The company’s single-family serious delinquency rate and the period of time that loans remain seriously delinquent continue to be negatively impacted by the length of time required to complete a foreclosure in some states. High levels of foreclosures, changes in state foreclosure laws, new federal and state servicing requirements imposed by regulatory actions and legal settlements, and the need for servicers to adapt to these changes have lengthened the time it takes to foreclose on a mortgage loan in a number of states, particularly in New York, Florida, and New Jersey. Other factors such as the pace of loan modifications, changes in home prices, unemployment levels, and other macroeconomic conditions also influence serious delinquency rates.

Fourth Quarter and Full Year 2014 Results
9


Total Loss Reserves, which reflect the company’s estimate of the probable losses the company has incurred in its guaranty book of business, including concessions it granted borrowers upon modification of their loans, decreased to $38.2 billion as of December 31, 2014 from $47.3 billion as of December 31, 2013. The total loss reserve coverage to total nonaccrual loans was 59 percent as of December 31, 2014, compared with 58 percent as of September 30, 2014 and 57 percent as of December 31, 2013.
PROVIDING LIQUIDITY AND SUPPORT TO THE MARKET
Liquidity
Fannie Mae provided approximately $434 billion in liquidity to the mortgage market in 2014, including approximately $128 billion in liquidity in the fourth quarter of 2014, through its purchases and guarantees of loans, which resulted in:
887,000 home purchases in 2014, including approximately 243,000 in the fourth quarter of 2014
937,000 mortgage refinancings in 2014, including approximately 264,000 in the fourth quarter of 2014
446,000 units of multifamily housing in 2014, including approximately 157,000 in the fourth quarter of 2014

Fourth Quarter and Full Year 2014 Results
10



The company remained the largest single issuer of single-family mortgage-related securities in the secondary market in the fourth quarter of 2014, with an estimated market share of new single-family mortgage-related securities issuances of 40 percent, compared with 46 percent in the fourth quarter of 2013 and 40 percent for all of 2014.
Fannie Mae also remained a continuous source of liquidity in the multifamily market in 2014. As of September 30, 2014 (the latest date for which information is available), the company owned or guaranteed approximately 19 percent of the outstanding debt on multifamily properties.
Refinancing Initiatives
Through the company’s Refi Plus initiative, which offers refinancing flexibility to eligible Fannie Mae borrowers and includes HARP, the company acquired approximately 60,000 loans in the fourth quarter of 2014 and approximately 302,000 loans for the full year of 2014. Refinancings delivered to Fannie Mae through Refi Plus in the fourth quarter of 2014 reduced borrowers’ monthly mortgage payments by an average of $172. The company expects the volume of refinancings under HARP to continue to decline, due to a decrease in the population of borrowers with loans that have high LTV ratios who are willing to refinance and would benefit from refinancing.

Fourth Quarter and Full Year 2014 Results
11


Home Retention Solutions and Foreclosure Alternatives
To reduce the credit losses Fannie Mae ultimately incurs on its book of business, the company has been focusing its efforts on several strategies, including reducing defaults by offering home retention solutions, such as loan modifications.
 
For the Year Ended December 31,
 
2014
 
2013
 
2012
 
Unpaid Principal Balance
 
Number of Loans
 
Unpaid Principal Balance
 
Number of Loans
 
Unpaid Principal Balance
 
Number of Loans
 
(Dollars in millions)
Home retention strategies:
 
 
 
 
 
 
 
 
 
 
 
Modifications
$
20,686

 
122,823

 
$
28,801

 
160,007

 
$
30,640

 
163,412

Repayment plans and forbearances completed
986

 
7,309

 
1,594

 
12,022

 
3,298

 
23,329

Total home retention strategies
21,672

 
130,132

 
30,395

 
172,029

 
33,938

 
186,741

Foreclosure alternatives:
 
 
 
 
 
 
 
 
 
 
 
Short sales
4,795

 
23,188

 
9,786

 
46,570

 
15,916

 
73,528

Deeds-in-lieu of foreclosure
1,786

 
11,292

 
2,504

 
15,379

 
2,590

 
15,204

Total foreclosure alternatives
6,581

 
34,480

 
12,290

 
61,949

 
18,506

 
88,732

Total loan workouts
$
28,253

 
164,612

 
$
42,685

 
233,978

 
$
52,444

 
275,473

Loan workouts as a percentage of single-family guaranty book of business
0.99
%
 
0.94
%
 
1.48
%
 
1.33
%
 
1.85
%
 
1.57
%
Fannie Mae views foreclosure as a last resort. For homeowners and communities in need, the company offers alternatives to foreclosure. In dealing with homeowners in distress, the company first seeks home retention solutions, which enable borrowers to stay in their homes, before turning to foreclosure alternatives.
Fannie Mae provided approximately 34,000 loan workouts during the fourth quarter of 2014 and approximately 165,000 for the full year of 2014 enabling borrowers to avoid foreclosure.
Fannie Mae completed approximately 26,000 loan modifications during the fourth quarter of 2014 and approximately 123,000 for the full year of 2014.

Fourth Quarter and Full Year 2014 Results
12


FORECLOSURES AND REO
When there is no viable home retention solution or foreclosure alternative that can be applied, the company seeks to move to foreclosure expeditiously in an effort to minimize prolonged delinquencies that can hurt local home values and destabilize communities.
  
For the Year Ended December 31,
 
 
2014
 
2013
 
2012
 
Single-family foreclosed properties (number of properties):
 
 
 
 
 
 
Beginning of period inventory of single-family foreclosed properties (REO)
103,229

 
105,666

 
118,528

 
Total properties acquired through foreclosure
116,637

 
144,384

 
174,479

 
Dispositions of REO
(132,803
)
 
(146,821
)
 
(187,341
)
 
End of period inventory of single-family foreclosed properties (REO)
87,063

 
103,229

 
105,666

 
Carrying value of single-family foreclosed properties (dollars in millions)
$
9,745

 
$
10,334

 
$
9,505

 
Single-family foreclosure rate
0.67

%
0.82

%
0.99

%
Fannie Mae acquired 25,265 single-family REO properties, primarily through foreclosure, in the fourth quarter of 2014, compared with 27,798 in the third quarter of 2014.
As of December 31, 2014, the company’s inventory of single-family REO properties was 87,063, compared with 92,386 as of September 30, 2014. The carrying value of the company’s single-family REO was $9.7 billion as of December 31, 2014.
The company’s single-family foreclosure rate was 0.67 percent for the full year of 2014. This reflects the total number of single-family properties acquired through foreclosure or deeds-in-lieu of foreclosure as a percentage of the total number of loans in Fannie Mae’s single-family guaranty book of business.
The company provides further discussion of its financial results and condition, credit performance, and other matters in its 2014 Form 10-K. Additional information about the company’s credit performance, the characteristics of its guaranty book of business, its foreclosure-prevention efforts, and other measures is contained in the “2014 Credit Supplement” at www.fanniemae.com.
# # #

In this release, the company has presented a number of estimates, forecasts, expectations, and other forward-looking statements, including statements regarding: its future dividend payments to Treasury; the level and sources of its future revenues; the company’s future profitability; the level of the company’s earnings in future years as compared with 2014; the drivers of the expected decline in the company’s earnings in future years; the factors that will affect the company’s future financial results; the company’s future single-family serious delinquency rates; the future volume of its HARP refinancings; the future fair value of the company’s securities and derivatives; and the impact of the company’s actions to reduce credit losses. These estimates, forecasts, expectations, and statements are forward-looking statements based on the company’s current assumptions regarding numerous factors, including future home prices, the future performance of its loans and the future guaranty fee rates applicable to the loans the company acquires. Actual results, and future projections, could be materially different from what is set forth in the forward-looking statements as a result of: home price changes; interest rate changes; unemployment rates; other macroeconomic and housing market variables; the company’s future serious delinquency rates; the company’s future guaranty fee pricing, including any directive from FHFA to change the company’s guaranty fee pricing, and the impact of that pricing on the company’s guaranty fee revenues and competitive environment; government policy; credit availability, borrower behavior, including increases in the number of underwater borrowers who strategically default on their mortgage loan; the volume of loans it modifies; the effectiveness of its loss mitigation strategies and activities; significant changes in modification and foreclosure activity; management of its real estate owned inventory and pursuit of contractual remedies; changes in the fair value of its assets and liabilities; future legislative or regulatory requirements or changes that have a significant impact on the company’s business, such as a requirement that the company implement a principal forgiveness program or the enactment of housing finance reform legislation; the company’s reliance on and future updates to the company’s models relating to loss reserves, including the assumptions used by these models; changes in generally accepted accounting principles; changes to the company’s accounting policies; whether the company’s counterparties meet their obligations in full; effects from activities the company takes to support the mortgage market and help borrowers; the company’s future objectives and activities in support of those objectives, including actions the company may take to reach additional underserved creditworthy borrowers; actions the company may be required to take by FHFA, as its conservator or as its regulator, such as changes in the type of business the company does; the conservatorship and its effect on the company’s business; the investment by Treasury and its effect on the company’s business; the uncertainty of the company’s future; challenges the company faces in retaining and hiring qualified employees; the deteriorated credit performance of many loans in the company’s guaranty book of business; a decrease in the company’s credit ratings; defaults by one or more institutional

Fourth Quarter and Full Year 2014 Results
13


counterparties; resolution or settlement agreements the company may enter into with its counterparties; operational control weaknesses; changes in the fiscal and monetary policies of the Federal Reserve, including any change in the Federal Reserve’s policy toward the reinvestment of principal payments of mortgage-backed securities or any future sales of such securities; changes in the structure and regulation of the financial services industry; the company’s ability to access the debt markets; disruptions in the housing, credit, and stock markets; government investigations and litigation; the company’s reliance on and the performance of the company’s servicers; conditions in the foreclosure environment; global political risk; natural disasters, terrorist attacks, pandemics, or other major disruptive events; information security breaches; and many other factors, including those discussed in the “Risk Factors” section of and elsewhere in the company’s annual report on Form 10-K for the year ended December 31, 2014, and elsewhere in this release.
Fannie Mae provides Web site addresses in its news releases solely for readers’ information. Other content or information appearing on these Web sites is not part of this release.
Fannie Mae enables people to buy, refinance, or rent homes.
Visit us at: www.fanniemae.com/progress
Follow us on Twitter: http://twitter.com/FannieMae



Fourth Quarter and Full Year 2014 Results
14


ANNEX
FANNIE MAE
(In conservatorship)
Consolidated Balance Sheets
(Dollars in millions, except share amounts)
 
As of December 31,
 
2014
 
2013
ASSETS
Cash and cash equivalents
 
$
22,023

 
 
 
$
19,228

 
Restricted cash (includes $27,515 and $23,982, respectively, related to consolidated trusts)
 
32,542

 
 
 
28,995

 
Federal funds sold and securities purchased under agreements to resell or similar arrangements
 
30,950

 
 
 
38,975

 
Investments in securities:
 
 
 
 
 
 
 
Trading, at fair value
 
31,504

 
 
 
30,768

 
Available-for-sale, at fair value (includes $596 and $998, respectively, related to consolidated trusts)
 
30,654

 
 
 
38,171

 
Total investments in securities
 
62,158

 
 
 
68,939

 
Mortgage loans:
 
 
 
 
 
 
 
Loans held for sale, at lower of cost or fair value
 
331

 
 
 
380

 
Loans held for investment, at amortized cost:
 
 
 
 
 
 
 
Of Fannie Mae
 
272,360

 
 
 
300,159

 
Of consolidated trusts (includes $15,629 and $14,268, respectively, at fair value and loans pledged as collateral that may be sold or repledged of $0 and $442, respectively)
 
2,782,344

 
 
 
2,769,547

 
Total loans held for investment
 
3,054,704

 
 
 
3,069,706

 
Allowance for loan losses
 
(35,541
)
 
 
 
(43,846
)
 
Total loans held for investment, net of allowance
 
3,019,163

 
 
 
3,025,860

 
Total mortgage loans
 
3,019,494

 
 
 
3,026,240

 
Accrued interest receivable, net (includes $7,169 and $7,271, respectively, related to consolidated trusts)
 
8,193

 
 
 
8,319

 
Acquired property, net
 
10,618

 
 
 
11,621

 
Deferred tax assets, net
 
42,206

 
 
 
47,560

 
Other assets (includes cash pledged as collateral of $1,646 and $1,590, respectively)
 
19,992

 
 
 
20,231

 
Total assets
 
$
3,248,176

 
 
 
$
3,270,108

 
LIABILITIES AND EQUITY
Liabilities:
 
 
 
 
 
 
 
Accrued interest payable (includes $8,282 and $8,276, respectively, related to consolidated trusts)
 
$
10,232

 
 
 
$
10,553

 
Federal funds purchased and securities sold under agreements to repurchase
 
50

 
 
 

 
Debt:
 
 
 
 
 
 
 
Of Fannie Mae (includes $6,403 and $1,308, respectively, at fair value)
 
460,443

 
 
 
529,434

 
Of consolidated trusts (includes $19,483 and $14,976, respectively, at fair value)
 
2,761,712

 
 
 
2,705,089

 
Other liabilities (includes $503 and $488, respectively, related to consolidated trusts)
 
12,019

 
 
 
15,441

 
Total liabilities
 
3,244,456

 
 
 
3,260,517

 
Commitments and contingencies
 

 
 
 

 
Fannie Mae stockholders’ equity:
 
 
 
 
 
 
 
Senior preferred stock, 1,000,000 shares issued and outstanding
 
117,149

 
 
 
117,149

 
Preferred stock, 700,000,000 shares are authorized— 555,374,922 shares issued and outstanding
 
19,130

 
 
 
19,130

 
Common stock, no par value, no maximum authorization—1,308,762,703 shares issued, 1,158,082,750 and 1,158,080,657 shares outstanding, respectively
 
687

 
 
 
687

 
Accumulated deficit
 
(127,618
)
 
 
 
(121,227
)
 
Accumulated other comprehensive income
 
1,733

 
 
 
1,203

 
Treasury stock, at cost, 150,679,953 and 150,682,046 shares, respectively
 
(7,401
)
 
 
 
(7,401
)
 
Total Fannie Mae stockholders’ equity
 
3,680

 
 
 
9,541

 
Noncontrolling interest
 
40

 
 
 
50

 
Total equity
 
3,720

 
 
 
9,591

 
Total liabilities and equity
 
$
3,248,176

 
 
 
$
3,270,108

 
See Notes to Consolidated Financial Statements in 2014 Form 10-K

Fourth Quarter and Full Year 2014 Results
15


FANNIE MAE
(In conservatorship)
Consolidated Statements of Operations and Comprehensive Income
(Dollars and shares in millions, except per share amounts)
 
For the Year Ended December 31,
 
2014
 
2013
 
2012
Interest income:
 
 
 
 
 
 
 
 
 
 
 
Trading securities
 
$
553

 
 
 
$
779

 
 
 
$
989

 
Available-for-sale securities
 
1,622

 
 
 
2,357

 
 
 
3,299

 
Mortgage loans (includes $101,835, $101,448, and $110,451, respectively, related to consolidated trusts)
 
112,120

 
 
 
114,238

 
 
 
124,706

 
Other
 
110

 
 
 
175

 
 
 
196

 
Total interest income
 
114,405

 
 
 
117,549

 
 
 
129,190

 
Interest expense:
 
 
 
 
 
 
 
 
 
 
 
Short-term debt
 
94

 
 
 
131

 
 
 
152

 
Long-term debt (includes $85,835, $84,751, and $95,612, respectively, related to consolidated trusts)
 
94,343

 
 
 
95,014

 
 
 
107,537

 
Total interest expense
 
94,437

 
 
 
95,145

 
 
 
107,689

 
Net interest income
 
19,968

 
 
 
22,404

 
 
 
21,501

 
Benefit for credit losses
 
3,964

 
 
 
8,949

 
 
 
852

 
Net interest income after benefit for credit losses
 
23,932

 
 
 
31,353

 
 
 
22,353

 
Investment gains (losses), net
 
936

 
 
 
1,127

 
 
 
(226
)
 
Fair value (losses) gains, net
 
(4,833
)
 
 
 
2,959

 
 
 
(2,977
)
 
Debt extinguishment gains (losses), net
 
66

 
 
 
131

 
 
 
(244
)
 
Fee and other income
 
5,887

 
 
 
3,930

 
 
 
1,487

 
Non-interest income (loss)
 
2,056

 
 
 
8,147

 
 
 
(1,960
)
 
Administrative expenses:
 
 
 
 
 
 
 
 
 
 
 
Salaries and employee benefits
 
1,321

 
 
 
1,218

 
 
 
1,195

 
Professional services
 
1,076

 
 
 
910

 
 
 
766

 
Occupancy expenses
 
203

 
 
 
189

 
 
 
188

 
Other administrative expenses
 
177

 
 
 
228

 
 
 
218

 
Total administrative expenses
 
2,777

 
 
 
2,545

 
 
 
2,367

 
Foreclosed property expense (income)
 
142

 
 
 
(2,839
)
 
 
 
(254
)
 
Temporary Payroll Cut Continuation Act of 2011 (“TCCA”) fees
 
1,375

 
 
 
1,001

 
 
 
238

 
Other expenses, net
 
544

 
 
 
226

 
 
 
822

 
Total expenses
 
4,838

 
 
 
933

 
 
 
3,173

 
Income before federal income taxes
 
21,150

 
 
 
38,567

 
 
 
17,220

 
(Provision) benefit for federal income taxes
 
(6,941
)
 
 
 
45,415

 
 
 

 
Net income
 
14,209

 
 
 
83,982

 
 
 
17,220

 
Other comprehensive income:
 
 
 
 
 
 
 
 
 
 
 
Changes in unrealized gains on available-for-sale securities, net of reclassification adjustments and taxes
 
494

 
 
 
693

 
 
 
1,735

 
Other
 
36

 
 
 
126

 
 
 
(116
)
 
Total other comprehensive income
 
530

 
 
 
819

 
 
 
1,619

 
Total comprehensive income
 
14,739

 
 
 
84,801

 
 
 
18,839

 
Less: Comprehensive (income) loss attributable to noncontrolling interest
 
(1
)
 
 
 
(19
)
 
 
 
4

 
Total comprehensive income attributable to Fannie Mae
 
$
14,738

 
 
 
$
84,782

 
 
 
$
18,843

 
Net income
 
$
14,209

 
 
 
$
83,982

 
 
 
$
17,220

 
Less: Net (income) loss attributable to noncontrolling interest
 
(1
)
 
 
 
(19
)
 
 
 
4

 
Net income attributable to Fannie Mae
 
$
14,208

 
 
 
$
83,963

 
 
 
$
17,224

 
Dividends distributed or available for distribution to senior preferred stockholder
 
(15,323
)
 
 
 
(85,419
)
 
 
 
(15,827
)
 
Net (loss) income attributable to common stockholders
 
$
(1,115
)
 
 
 
$
(1,456
)
 
 
 
$
1,397

 
(Loss) earnings per share:
 
 
 
 
 
 
 
 
 
 
 
Basic
 
$
(0.19
)
 
 
 
$
(0.25
)
 
 
 
$
0.24

 
Diluted
 
(0.19
)
 
 
 
(0.25
)
 
 
 
0.24

 
Weighted-average common shares outstanding:
 
 
 
 
 
 
 
 
 
 
 
Basic
 
5,762

 
 
 
5,762

 
 
 
5,762

 
Diluted
 
5,762

 
 
 
5,762

 
 
 
5,893

 

See Notes to Consolidated Financial Statements in 2014 Form 10-K


Fourth Quarter and Full Year 2014 Results
16


FANNIE MAE
(In conservatorship)
Consolidated Statements of Cash Flows
(Dollars in millions)
 
For the Year Ended December 31,
 
2014
 
2013
 
2012
Cash flows (used in) provided by operating activities:
 
 
 
 
 
Net income
$
14,209

 
$
83,982

 
$
17,220

Reconciliation of net income to net cash (used in) provided by operating activities:
 
 
 
 
 
Amortization of cost basis adjustments
(4,265
)
 
(5,104
)
 
(2,335
)
Benefit for credit losses
(3,964
)
 
(8,949
)
 
(852
)
Valuation gains
(2,159
)
 
(2
)
 
(1,345
)
Current and deferred federal income taxes
4,126

 
(47,766
)
 
10

Net change in trading securities
(2,666
)
 
1,575

 
31,972

Net gains related to the disposition of acquired property and preforeclosure sales, including credit enhancements
(4,510
)
 
(6,024
)
 
(6,009
)
Other, net
(2,109
)
 
(4,809
)
 
(1,660
)
Net cash (used in) provided by operating activities
(1,338
)
 
12,903

 
37,001

Cash flows provided by investing activities:
 
 
 
 
 
Purchases of trading securities held for investment

 
(7,521
)
 
(3,216
)
Proceeds from maturities and paydowns of trading securities held for investment
1,358

 
2,491

 
3,508

Proceeds from sales of trading securities held for investment
1,668

 
14,585

 
3,861

Proceeds from maturities and paydowns of available-for-sale securities
5,853

 
10,116

 
12,636

Proceeds from sales of available-for-sale securities
3,265

 
15,497

 
1,306

Purchases of loans held for investment
(132,650
)
 
(195,386
)
 
(210,488
)
Proceeds from repayments and sales of loans acquired as held for investment of Fannie Mae
26,719

 
48,875

 
31,322

Proceeds from repayments and sales of loans acquired as held for investment of consolidated trusts
388,348

 
631,088

 
797,331

Net change in restricted cash
(3,547
)
 
38,924

 
(17,122
)
Advances to lenders
(100,045
)
 
(139,162
)
 
(144,064
)
Proceeds from disposition of acquired property and preforeclosure sales
25,476

 
38,349

 
38,685

Net change in federal funds sold and securities purchased under agreements to resell or similar arrangements
8,025

 
(6,475
)
 
13,500

Other, net
197

 
1,373

 
434

Net cash provided by investing activities
224,667

 
452,754

 
527,693

Cash flows used in financing activities:
 
 
 
 
 
Proceeds from issuance of debt of Fannie Mae
380,282

 
372,361

 
736,065

Payments to redeem debt of Fannie Mae
(450,140
)
 
(459,745
)
 
(854,111
)
Proceeds from issuance of debt of consolidated trusts
275,353

 
409,979

 
396,513

Payments to redeem debt of consolidated trusts
(405,505
)
 
(707,544
)
 
(832,537
)
Payments of cash dividends on senior preferred stock to Treasury
(20,594
)
 
(82,452
)
 
(11,608
)
Proceeds from senior preferred stock purchase agreement with Treasury

 

 
4,571

Other, net
70

 
(145
)
 
(9
)
Net cash used in financing activities
(220,534
)
 
(467,546
)
 
(561,116
)
Net increase (decrease) in cash and cash equivalents
2,795

 
(1,889
)
 
3,578

Cash and cash equivalents at beginning of period
19,228

 
21,117

 
17,539

Cash and cash equivalents at end of period
$
22,023

 
$
19,228

 
$
21,117

Cash paid during the period for:
 
 
 
 
 
Interest
$
108,667

 
$
109,240

 
$
119,259

Income taxes
2,815

 
2,350

 

Non-cash activities:
 
 
 
 
 
Net mortgage loans acquired by assuming debt
$
190,151

 
$
433,007

 
$
537,862

Net transfers from mortgage loans of Fannie Mae to mortgage loans of consolidated trusts
113,611

 
179,097

 
165,272

Transfers from advances to lenders to loans held for investment of consolidated trusts
93,909

 
137,074

 
133,554

Net transfers from mortgage loans to acquired property
24,742

 
34,024

 
46,981


See Notes to Consolidated Financial Statements in 2014 Form 10-K




Fourth Quarter and Full Year 2014 Results
17


FANNIE MAE
(In conservatorship)
Consolidated Statements of Changes in Equity (Deficit)
(Dollars and shares in millions)
 
Fannie Mae Stockholders’ Equity (Deficit) 
 
 
 
 
 
Shares Outstanding
 
Senior
Preferred Stock
 
Preferred
Stock
 
Common
Stock
 
Additional
Paid-In
Capital
 
Retained
Earnings
(Accumulated
Deficit)
 
Accumulated
Other
Comprehensive
Income (Loss)
 
Treasury
Stock
 
Non
Controlling
Interest
 
Total
Equity
(Deficit)
Senior
Preferred
 
Preferred
 
Common
 
 
 
 
 
 
 
Balance as of December 31, 2011
1

 
556

 
1,158

 
$
112,578

 
$
19,130

 
$
687

 
$

 
$
(128,381
)
 
$
(1,235
)
 
$
(7,403
)
 
$
53

 
$
(4,571
)
Change in investment in noncontrolling interest

 

 

 

 

 

 

 

 

 

 
(8
)
 
(8
)
Comprehensive income:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income

 

 

 

 

 

 

 
17,224

 

 

 
(4
)
 
17,220

Other comprehensive income, net of tax effect:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Changes in net unrealized losses on available-for-sale securities (net of tax of $702)

 

 

 

 

 

 

 

 
1,289

 

 

 
1,289

Reclassification adjustment for losses included in net income (net of tax of $241)

 

 

 

 

 

 

 

 
446

 

 

 
446

Prior service cost and actuarial gains, net of amortization for defined benefit plans

 

 

 

 

 

 

 

 
(116
)
 

 

 
(116
)
Total comprehensive income
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
18,839

Senior preferred stock dividends

 

 

 

 

 

 
1

 
(11,609
)
 

 

 

 
(11,608
)
Increase to senior preferred liquidation preference

 

 

 
4,571

 

 

 

 

 

 

 

 
4,571

Other

 

 

 

 

 

 
(1
)
 

 

 
2

 

 
1

Balance as of December 31, 2012
1

 
556

 
1,158

 
117,149

 
19,130

 
687

 

 
(122,766
)
 
384

 
(7,401
)
 
41

 
7,224

Change in investment in noncontrolling interest

 

 

 

 

 

 

 

 

 

 
(10
)
 
(10
)
Comprehensive income:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income

 

 

 

 

 

 

 
83,963

 

 

 
19

 
83,982

Other comprehensive income, net of tax effect:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Changes in net unrealized gains on available-for-sale securities (net of tax of $529)

 

 

 

 

 

 

 

 
983

 

 

 
983

Reclassification adjustment for gains included in net income (net of tax of $157)

 

 

 

 

 

 

 

 
(290
)
 

 

 
(290
)
Prior service cost and actuarial gains, net of amortization for defined benefit plans (net of tax of $68)

 

 

 

 

 

 

 

 
126

 

 

 
126

Total comprehensive income
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
84,801

Senior preferred stock dividends

 

 

 

 

 

 

 
(82,452
)
 

 

 

 
(82,452
)
Other

 

 

 

 

 

 

 
28

 

 

 

 
28

Balance as of December 31, 2013
1

 
556

 
1,158

 
117,149

 
19,130

 
687

 

 
(121,227
)
 
1,203

 
(7,401
)
 
50

 
9,591

Change in investment in noncontrolling interest

 

 

 

 

 

 

 

 

 

 
(11
)
 
(11
)
Comprehensive income:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income

 

 

 

 

 

 

 
14,208

 

 

 
1

 
14,209

Other comprehensive income, net of tax effect:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Changes in net unrealized gains on available-for-sale securities (net of tax of $389)

 

 

 

 

 

 

 

 
722

 

 

 
722

Reclassification adjustment for gains included in net income (net of tax of $123)

 

 

 

 

 

 

 

 
(228
)
 

 

 
(228
)
Prior service cost and actuarial gains, net of amortization for defined benefit plans (net of tax of $20)

 

 

 

 

 

 

 

 
36

 

 

 
36

Total comprehensive income
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
14,739

Senior preferred stock dividends

 

 

 

 

 

 

 
(20,594
)
 

 

 

 
(20,594
)
Other

 

 

 

 

 

 

 
(5
)
 

 

 

 
(5
)
Balance as of December 31, 2014
1

 
556

 
1,158

 
$
117,149

 
$
19,130

 
$
687

 
$

 
$
(127,618
)
 
$
1,733

 
$
(7,401
)
 
$
40

 
$
3,720


See Notes to Consolidated Financial Statements in 2014 Form 10-K


Fourth Quarter and Full Year 2014 Results
18
exhibit992
February 20, 2015 Fannie Mae 2014 Credit Supplement Exhibit 99.2


 
 This presentation includes information about Fannie Mae, including information contained in Fannie Mae’s Annual Report on Form 10-K for the year ended December 31, 2014, the “2014 Form 10-K.” Some of the terms used in these materials are defined and discussed more fully in the 2014 Form 10-K. These materials should be reviewed together with the 2014 Form 10-K, which is available on the “SEC Filings” page in the “Investor Relations” section of Fannie Mae’s web site at www.fanniemae.com.  Some of the information in this presentation is based upon information that we received from third-party sources such as sellers and servicers of mortgage loans. Although we generally consider this information reliable, we do not independently verify all reported information.  Due to rounding, amounts reported in this presentation may not add to totals indicated (or 100%). A dash indicates less than 0.05% or a null value.  Unless otherwise indicated data labeled as “2014” is as of December 31, 2014 or for the full year of 2014.


 
2 Table of Contents Home Prices Home Price Growth/Decline Rates in the U.S. 3 One Year Home Price Change as of 2014 Q4 4 Home Price Change From 2006 Q3 Through 2014 Q4 5 Credit Profile of Fannie Mae Single-Family Loans Credit Characteristics of Single-Family Business Acquisitions 6 Credit Risk Profile Summary of Single-Family Business Acquisitions 7 Certain Credit Characteristics of Single-Family Business Acquisitions: 2003 - 2014 8 Single-Family Business Acquisitions by Loan Purpose 9 Credit Characteristics of Single-Family Conventional Guaranty Book of Business by Origination Year 10 Credit Characteristics of Single-Family Conventional Guaranty Book of Business by Certain Product Features 11 Geographic Credit Profile of Fannie Mae Single-Family Loans and Foreclosed Properties (REO) Credit Characteristics of Single-Family Conventional Guaranty Book of Business and Single-Family Real Estate Owned (REO) in Select States 12 Seriously Delinquent Loan and REO Ending Inventory Share by Select States 13 Single-Family Short Sales and REO Sales Prices to UPB of Mortgage Loans 14 Workouts of Fannie Mae Single-Family Loans Single-Family Loan Workouts 15 Re-performance Rates of Modified Single-Family Loans 16 Additional Credit Information for Fannie Mae Single-Family Loans Credit Loss Concentration of Single-Family Conventional Guaranty Book of Business 17 Cumulative Default Rates of Single-Family Conventional Guaranty Book of Business by Origination Year 18 Credit Profile of Fannie Mae Multifamily Loans Multifamily Credit Profile by Loan Attributes 19 Multifamily Credit Profile by Acquisition Year 20 Multifamily Credit Profile 21 Multifamily 2014 Credit Losses by State 22


 
3 7.6% 10.6% 11.3% 2.7% -3.6% -9.1% -4.8% -4.3% -3.5% 4.1% 8.0% 4.7% -15% -10% -5% 0% 5% 10% 15% 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 S&P/Case-Shiller Index (1) 9.8% 13.6% 13.5% 1.7% -5.4% -12.0% -3.9% -4.1% -3.9% 6.5% 10.8% 5.0% Home Price Growth/Decline Rates in the U.S. Fannie Mae Home Price Index *Estimate based on purchase transactions in Fannie-Freddie acquisition and public deed data available through the end of January 2015. Including subsequent data may lead to materially different results. **Year-to-date as of September 2014. As comparison, Fannie Mae’s index for the same period is 5.0%. Based on our home price index, we estimate that home prices on a national basis increased by 4.7% in 2014, following increases of 8.0% in 2013 and 4.1% in 2012. Despite the recent increases in home prices, we estimate that, through December 31, 2014, home prices on a national basis remained 10.1% below their peak in the third quarter of 2006. Our home price estimates are based on preliminary data and are subject to change as additional data become available. ** *


 
4 AK 3 . 3% 0 . 2% HI 6 . 8% 0 . 8% TX 6.5% 5.6% MT 4.5% 0.3% CA 9.4% 19 .6% NM 1. 6% 0. 5% AZ 5 .5% 2 .4% NV 9.5% 1.0% CO 9. 2% 2. 7% WY 3.5% 0 .2% OR 7.4% 1 .7% UT 3.7% 1.1% MN 3.8% 1.9% ID 4.5% 0.5% KS 2. 9% 0. 5% NE 2.5% 0 .4% SD 3.4% 0 .2% ND 5.7% 0.1% OK 2.7% 0.6% MO 2.7% 1 .3% WA 6.4% 3.5% GA 6.5% 2.7% I L 4 .2% 4 .1% IA 1.3% 0.7% WI 2.6% 1.8% AR 2. 1% 0. 5% AL 0.7% 1.0% MS 2.5% 0 .4% OH 3.0% 2 .1% NC 1.8% 2.4% NY 3.9% 5.5% LA 2.7% 0.9% PA 1. 6% 3. 0% FL 1 0. 0% 5. 6% TN 3.9% 1.3% MI 6.1% 2.4% KY 2.9% 0 .6% VA 2.3% 3 .5% IN 1 .4% 1 .2% ME 0. 9% 0. 3% SC 3. 4% 1. 2% WV 0.8% 0.2% MD 2.6% 2 .7% NH 4.2% 0.5% VT - 0 .4% 0.2% MA 2.9% 3 .0% NJ 1.7% 4.0% CT 1.3% 1.3% DE 2.2% 0 .4% RI 4.9% 0.3% DC 12 .2% 0.4% Below 0% 0% to 5% 5% to 10% 10% and above *Source: Fannie Mae. Home price estimates are based on purchase transactions in Fannie-Freddie acquisition and public deed data available through the end of January 2015. UPB estimates are based on data available through the end of December 2014. Including subsequent data may lead to materially different results. One Year Home Price Change as of 2014 Q4* United States 4.7% State Growth Rate State: NM Growth Rate: 1.6% UPB %: 0.5% Example


 
5 AK 8 .7 % 0 .2 % HI -4 . 0% 0. 8% TX 18. 0% 5. 6% MT 7.4% 0.3% CA -22. 5% 19. 6% CO 9. 7% 2. 7% NM -9.8% 0.5% UT 0. 7% 1. 1% KS 4. 5% 0. 5% OR -9. 7% 1.7% WY 11. 4% 0. 2% AZ -31.1% 2. 4% NE 6.6% 0.4%NV - 38.3% 1. 0% SD 15. 3% 0. 2% MO -4.9% 1.3% MN -10.8% 1. 9%I D -12 .8% 0. 5% I A 5. 9% 0. 7% ND 43. 2% 0.1% OK 10. 8% 0.6% AR 0. 3% 0. 5% WI -7 .3% 1.8% WA - 10. 3% 3.5% AL -5 .0% 1.0% NC -3.2% 2. 4% GA -13.4% 2.7% MS -3.9% 0. 4% NY -5 .9% 5. 5% PA -1 .6% 3. 0% IN 0 . 2% 1. 2% OH -7. 8% 2. 1% LA 8. 6% 0. 9% KY 3. 2% 0. 6% IL -17 .7% 4. 1% FL -33. 8% 5. 6% TN -0 . 0% 1. 3% MI - 16 . 6% 2. 4% VA -13. 3% 3.5% ME -7.7% 0. 3% SC -5 .2% 1. 2% WV 0. 8% 0. 2% VT -7 .3% 0.2% MA -8.3% 3. 0% MD -21.9% 2. 7% NH -13. 6% 0. 5% NJ -21. 9% 4.0% CT - 19.5% 1. 3% DE - 16. 3% 0.4% RI -26. 3% 0.3% DC 24. 7% 0. 4% United States -10.1% *Source: Fannie Mae. Home price estimates are based on purchase transactions in Fannie-Freddie acquisition and public deed data available through the end of January 2015. UPB estimates are based on data available through the end of December 2014. Including subsequent data may lead to materially different results. Note: Home prices on a national basis reached a peak in the third quarter of 2006. Home Price Change From 2006 Q3 Through 2014 Q4* Below -30% -30% to -15% -15% to -5% -5% to 0% 0% to 5% 5% and Above State Growth Rate State: NM Growth Rate: -9.8% UPB %: 0.5% Example


 
6 Single-Family Acquisitions Excl. Refi Plus (2) Single-Family Acquisitions Excl. Refi Plus (2) Single-Family Acquisitions Excl. Refi Plus (2) Single-Family Acquisitions Excl. Refi Plus (2) Single-Family Acquisitions Excl. Refi Plus (2) Single-Family Acquisitions Excl. Refi Plus (2) Unpaid Principal Balance (billions) $369.8 $324.8 $106.0 $97.0 $102.3 $92.2 $85.2 $73.9 $76.4 $61.8 $728.4 $564.5 Weighted Average Origination Note Rate 4.31% 4.28% 4.22% 4.20% 4.28% 4.26% 4.37% 4.35% 4.41% 4.37% 3.78% 3.73% Origination Loan-to-Value (LTV) Ratio <= 60% 15.9% 15.1% 16.5% 15.8% 14.7% 13.9% 15.8% 14.8% 16.9% 16.5% 22.0% 23.5% 60.01% to 70% 12.2% 12.1% 12.7% 12.6% 11.7% 11.5% 11.7% 11.6% 12.5% 12.8% 13.9% 15.3% 70.01% to 80% 40.4% 43.5% 40.8% 42.7% 41.0% 43.5% 40.6% 44.1% 38.8% 44.0% 34.9% 41.2% 80.01% to 90% 13.1% 12.7% 13.3% 13.1% 13.8% 13.6% 13.0% 12.4% 12.3% 11.3% 10.5% 9.2% 90.01% to 100% 16.2% 16.5% 15.6% 15.9% 17.1% 17.5% 16.6% 17.1% 15.3% 15.4% 11.5% 10.8% > 100% 2.2%  1.2%  1.7%  2.3%  4.2%  7.1%  Weighted Average Origination LTV Ratio 76.6% 76.1% 75.8% 75.7% 77.1% 76.8% 76.8% 76.3% 76.8% 75.2% 75.7% 71.4% FICO Credit Scores (3) < 620 1.2%  0.9%  1.1%  1.3%  1.8%  1.4%  620 to < 660 5.4% 4.4% 5.4% 4.7% 5.4% 4.6% 5.3% 4.1% 5.7% 4.1% 3.4% 1.9% 660 to < 700 13.4% 12.6% 13.2% 12.7% 13.4% 12.7% 13.3% 12.3% 13.9% 12.6% 9.7% 7.8% 700 to < 740 21.0% 21.2% 20.8% 21.0% 21.1% 21.3% 20.8% 21.1% 21.3% 21.5% 18.2% 17.7% >=740 58.9% 61.7% 59.8% 61.6% 59.0% 61.4% 59.3% 62.5% 57.3% 61.7% 67.3% 72.5% Weighted Average FICO Credit Score 744 748 745 748 744 748 744 749 741 748 753 760 Certain Characteristics Fixed-rate 95.3% 94.9% 96.1% 95.9% 95.2% 94.9% 95.1% 94.6% 94.6% 93.8% 97.6% 97.0% Adjustable-rate 4.7% 5.1% 3.9% 4.1% 4.8% 5.1% 4.9% 5.4% 5.4% 6.2% 2.4% 3.0% Alt-A (4) 0.9%  0.6%  0.8%  0.8%  1.3%  1.3%  Interest Only         0.1% 0.1% 0.2% 0.3% Investor 9.0% 7.7% 8.2% 7.4% 8.1% 7.1% 9.0% 7.7% 11.2% 9.1% 9.3% 7.0% Condo/Co-op 10.3% 10.3% 9.9% 10.0% 10.1% 10.1% 10.6% 10.7% 10.7% 10.8% 10.4% 10.1% Refinance 48.3% 41.1% 50.3% 45.7% 43.4% 37.2% 45.6% 37.3% 54.9% 44.3% 70.2% 61.5% Loan Purpose Purchase 51.7% 58.9% 49.7% 54.3% 56.6% 62.8% 54.4% 62.7% 45.1% 55.7% 29.8% 38.5% Cash-out refinance 16.1% 18.3% 18.1% 19.8% 14.9% 16.5% 14.9% 17.2% 16.0% 19.8% 14.6% 18.8% Other refinance 32.2% 22.8% 32.2% 25.9% 28.5% 20.6% 30.7% 20.2% 38.9% 24.5% 55.6% 42.7% Top 3 Geographic Concentration California 21.2% California 22.1% California 20.5% California 20.9% California 21.2% California 23.7% Texas 7.7% Texas 7.5% Texas 8.0% Texas 8.2% Texas 7.4% Texas 5.8% Florida 5.3% Florida 5.1% Florida 5.2% Florida 5.4% Florida 5.6% Florida 4.7% Single-Family Acquisitions Single-Family Acquisitions Single-Family Acquisitions Single-Family Acquisitions Single-Family Acquisitions Single-Family Acquisitions Acquisition Period Full Year 2014 Q4 2014 Q3 2014 Q2 2014 Q1 2014 Full Year 2013 Credit Characteristics of Single-Family Business Acquisitions (1) (1) Percentage calculated based on unpaid principal balance of loans at time of acquisition. Single-family business acquisitions refer to single-family mortgage loans we acquire through purchase or securitization transactions. (2) Single-family business acquisitions for the applicable period excluding loans acquired under our Refi PlusTM initiative, which includes the Home Affordable Refinance Program® (“HARP®”). Our Refi Plus initiative provides expanded refinance opportunities for eligible Fannie Mae borrowers, and may involve the refinance of existing Fannie Mae loans with high loan-to-value ratios, including loans with loan-to-value ratios in excess of 100%. (3) FICO credit score is as of loan origination, as reported by the seller of the mortgage loan. (4) Newly originated Alt-A loans for the applicable periods consist of the refinance of existing loans under our Refi Plus initiative. For a description of our Alt-A loan classification criteria, refer to Fannie Mae’s 2014 Form 10-K.


 
7 <= 60% 60.01% to 80% 80.01% to 100% > 100% Total >= 740 -6.2% -2.4% 2.6% -2.4% -8.4% 660 to < 740 -0.2% 4.6% 4.0% -1.9% 6.5% 620 to < 660 0.3% 1.5% 0.6% -0.4% 2.0% < 620  0.1%  -0.2% -0.2% Total -6.1% 3.7% 7.2% -4.9% FIC O C red it S cor e (2 ) Change in Acquisitions Profile Origination Loan-to-Value (LTV) Ratio <= 60% 60.01% to 80% 80.01% to 95% > 95% Total >= 740 -8.0% -6.3% 4.4% -0.8% -10.8% 660 to < 740 -0.6% 3.9% 5.3% -0.4% 8.3% 620 to < 660 0.3% 1.4% 0.8%  2.5% Total -8.3% -0.9% 10.5% -1.2% FIC O C red it S cor e (2 ) Change in Acquisitions Profile Origination Loan-to-Value (LTV) Ratio <= 60% 60.01% to 80% 80.01% to 95% > 95% Total >= 740 18. % 40.9% 12.0% 1.2% 72.5% 660 to < 740 4.7% 14.3% 5.7% 0.8% 25.5% 620 to < 660 .4% 1.3% 0.2%  1.9% Total 23.5% 56.5% 17.9% 2. % 100.0%FIC O C red it S cor e (2 ) 2013 Origination Loan-to-Value (LTV) Ratio <= 60% 60.01% to 80% 8 . t 95 > 95% Total >= 740 10.3% 34.6 16.4 0.4% 6 7 660 to < 740 4.1% 18 2 1.1 0.4 33 620 to < 660 .7% .7 .0  4.4% Total 15.1% 55.6 28.4 0.9% 100.0%FIC O C red it S cor e (2 ) 2014 Origination Loan-to-Value (LTV) Ratio <= 60% 60.01% to 80% 80.01% to 100% > 100% Total >= 740 16.6% 34.3% 13.3% 3.1% 67.3% 660 to < 740 4.7% 12.8% 7.5% 2.8% 27.9% 620 to < 660 0.6% 1.4% 0.8% 0.7% 3.4% < 620 0.2% 0.3% 0.4% 0.5% 1.4% Total 22.0 48.8 22.1 7.1% 100.0% 2013 Origination Loan-to-Value (LTV) Ratio FIC O C red it S cor e (2 ) <= 60% 60.01% to 80% 8 . to 10 > 100% Total >= 740 10.3% 31.9 16.0 0.7% 58 9 660 to < 740 4.5% 17 4 1.6 0.9 34 4 620 to < 660 .9% .8 . .3 5.4 < 620 0.2% .4 .4 .2 1.2 Total 5.9% 5 .6 29.3% .2% 100. % 2014 Origination Loan-to-Value (LTV) Ratio FIC O C red it S cor e (2 )Credit Risk Profile Summary of Single-Family Business Acquisitions (1) Credit Profile for Single-Family Acquisitions (1) Percentage calculated based on unpaid principal balance of loans at time of acquisition. Single-family business acquisitions refer to single-family mortgage loans we acquire through purchase or securitization transactions. (2) FICO credit score is as of loan origination, as reported by the seller of the mortgage loan. FICO credit scores below 620 primarily consist of the refinance of existing loans under our Refi Plus initiative, which includes the Home Affordable Refinance Program (“HARP”). Our Refi Plus initiative provides expanded refinance opportunities for eligible Fannie Mae borrowers, and may involve the refinance of existing Fannie Mae loans with high loan-to-value ratios, including loans with loan-to-value ratios in excess of 100%. (3) Single-family business acquisitions for the applicable period excluding loans acquired under our Refi Plus initiative, which includes HARP. Credit Profile for Single-Family Acquisitions (Excluding Refi Plus) (3)


 
8 0% 5% 10% 15% 20% 660 680 700 720 740 760 780 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Weighted Average FICO Credit Score (Left Axis) FICO Credit Score < 620 (Right Axis) 0% 20% 40% 60% 80% 100% 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Share of Single-Family Business Acquisitions: Loan Purpose - Purchase 0% 20% 40% 60% 80% 100% 2003 2004 2005 20 6 20 7 20 8 2009 201 2011 2012 2013 2014 Share of Single-Family Business Acquisitions: Fixed Rate Product 0% 5% 10% 15% 20% 4 60% 80% 100% 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Weighted Average Origination LTV Ratio (Left Axis) Weighted Average Origination LTV Ratio Excluding HARP (Left Axis) Origination LTV > 90% (Right Axis) Certain Credit Characteristics of Single-Family Business Acquisitions: 2003 – 2014(1) (1) Percentage calculated based on unpaid principal balance of loans at time of acquisition. Single-family business acquisitions refer to single-family mortgage loans we acquire through purchase or securitization transactions. (2) The refinance of loans under the Home Affordable Refinance Program (“HARP”), which started in April 2009, contributed to an increase in our acquisition of loans with high loan-to-value ratios. (3) FICO credit score is as of loan origination, as reported by the seller of the mortgage loan. Loans acquired after 2009 with FICO credit scores below 620 primarily consist of the refinance of existing loans under our Refi Plus initiative, which includes HARP. FICO Credit Score (3) Origination Loan-to-Value Ratio (2) Product Feature


 
9 HARP (1) Refi Plus (Excluding HARP) (1) HARP (1) Refi Plus (Excluding HARP) (1) HARP (1) Refi Plus (Excluding HARP) (1) HARP (1) Refi Plus (Excluding HARP) (1) HARP (1) Refi Plus (Excluding HARP) (1) HARP (1) Refi Plus (Excluding HARP) (1) Unpaid Principal Balance (billions) $27.9 $44.7 $59.0 $80.5 $55.6 $81.2 $129.9 $73.8 $99.5 $64.4 $21.5 $23.5 Weighted Average Origination Note Rate 5.05% 4.85% 5.00% 4.68% 4.78% 4.44% 4.14% 3.89% 4.04% 3.80% 4.62% 4.39% Origination Loan-to-Value Ratio: <=80%  100%  100%  100%  100%  100%  100% 80.01% to 105% 99.1%  94.4%  88.1%  57.2%  58.4%  73.3%  105.01% to 125% 0.9%  5.6%  11.9%  22.1%  21.5%  16.9%  >125%    20.7% 20.1% 9.9% Weighted Average Origination Loan-to-Value Ratio 90.7% 63.3% 92.2% 62.3% 94.3% 60.2% 111.0% 61.1% 109.8% 60.2% 101.5% 61.3% FICO Credit Scores (2) < 620 1.2% 0.8% 2.0% 1.4% 2.1% 1.7% 3.7% 2.9% 6.7% 5.3% 10.6% 9.3% 620 to < 660 2.5% 1.7% 3.6% 2.4% 3.8% 2.8% 6.0% 4.2% 9.5% 6.9% 14.5% 11.2% 660 to < 740 31.9% 23.0% 33.1% 23.9% 32.6% 25.6% 33.8% 26.0% 38.7% 31.9% 41.0% 36.5% >=740 64.4% 74.5% 61.2% 72.3% 61.5% 70.0% 56.6% 66.9% 45.1% 55.8% 33.9% 43.0% Weighted Average FICO Credit Score 749 762 746 760 746 758 738 753 722 737 704 717 2013 2014 Acquisition Year 2009 2010 2011 2012 Single-Family Business Acquisitions by Loan Purpose (1) Our Refi Plus initiative, which started in April 2009, includes the Home Affordable Refinance Program (“HARP”). Our Refi Plus initiative provides expanded refinance opportunities for eligible Fannie Mae borrowers, and may involve the refinance of existing Fannie Mae loans with high loan-to-value ratios, including loans with loan-to-value ratios in excess of 100%. (2) FICO credit score is as of loan origination, as reported by the seller of the mortgage loan. 4.1% 9.8% 9.9 15.6% 13.7% 5.8% 6.5% 13.6% 14.4% 8.9% 8.8% 6.4% 69.4% 54.0% 52.2% 55.0% 47.7% 36.1% 20.1% 22.6% 23.5% 20.6% 29.8% 51.7% 0.0% 10.0% 20.0% 30.0% 40.0% 50.0% 60.0% 70.0% 80.0% 90.0% 100.0% 2009 2010 2011 2012 2013 2014 % o f Si ngl e-F am ily Bus ine ss A cqu isit ion s HARP Acquisitions Refi Plus Acquisitions (Excluding HARP) Refinance Acquisitions (Excluding Refi Plus) Purchase Acquisitions


 
10 As of December 31, 2014 Overall Book 2014 2013 2012 2011 2010 2009 2008 2007 2006 2005 and Earlier Unpaid Principal Balance (billions) (1) $2,789.2 $317.6 $584.8 $659.1 $276.5 $235.7 $171.0 $64.0 $113.1 $81.3 $286.2 Share of Single-Family Conventional Guaranty Book 100.0% 11.4% 21.0% 23.6% 9.9% 8.4% 6.1% 2.3% 4.1% 2.9% 10.3% Average Unpaid Principal Balance (1) $159,997 $199,884 $191,013 $191,969 $163,180 $161,958 $156,812 $147,607 $162,027 $145,929 $83,669 Serious Delinquency Rate 1.89% 0.04% 0.22% 0.27% 0.42% 0.59% 1.00% 6.27% 10.79% 9.61% 3.82% Weighted Average Origination Loan-to-Value Ratio 74.7% 76.9% 76.5% 76.2% 71.4% 71.2% 69.8% 74.7% 78.3% 75.3% 72.6% Origination Loan-to-Value Ratio > 90% (2) 15.9% 18.8% 20.0% 18.9% 12.6% 10.4% 6.6% 12.6% 20.8% 12.5% 10.7% Weighted Average Mark-to-Market Loan-to-Value Ratio 64.0% 74.7% 66.5% 60.1% 55.2% 56.8% 58.8% 72.9% 89.3% 87.0% 55.4% Mark-to-Market Loan-to-Value Ratio > 100% and <= 125% 3.7% 1.4% 3.0% 2.9% 0.5% 0.7% 0.8% 8.7% 21.6% 20.3% 4.1% Mark-to-Market Loan-to-Value Ratio > 125% 1.3% 0.4% 1.1% 0.9%    1.7% 9.4% 8.9% 1.1% Weighted Average FICO (3) 744 743 751 759 758 757 753 716 692 697 707 FICO < 620 (3) 2.5% 1.2% 1.6% 1.0% 0.7% 0.7% 0.8% 5.8% 11.2% 8.9% 7.4% Interest Only 2.5%  0.2% 0.3% 0.6% 0.9% 1.0% 8.0% 18.9% 21.0% 6.0% Negative Amortizing 0.2%         1.5% 1.2% Fixed-rate 92.0% 95.6% 97.6% 97.5% 95.0% 95.9% 97.4% 74.9% 64.5% 63.7% 77.5% Primary Residence 88.1% 86.9% 86.4% 88.7% 87.3% 89.4% 90.8% 87.4% 89.7% 87.5% 89.1% Condo/Co-op 9.4% 10.1% 10.3% 9.1% 8.7% 8.4% 8.8% 10.9% 9.7% 10.7% 8.8% Credit Enhanced (4) 16.2% 28.9% 20.1% 14.2% 9.3% 6.7% 6.0% 25.2% 30.3% 19.2% 10.8% Cumulative Default Rate (5)   0.1% 0.2% 0.2% 0.5% 0.6% 4.5% 13.7% 12.5%  Origination Year Credit Characteristics of Single-Family Conventional Guaranty Book of Business by Origination Year (1) Excludes non-Fannie Mae securities held in portfolio and those Alt-A and subprime wraps for which Fannie Mae does not have loan-level information. Fannie Mae had access to detailed loan-level information for approximately 99% of its single-family conventional guaranty book of business as of December 31, 2014. (2) The increase after 2009 is primarily the result of the Home Affordable Refinance Program (“HARP”), which involves the refinance of existing Fannie Mae loans with high loan-to- value ratios, including loans with loan-to-value ratios in excess of 100%. (3) FICO credit score is as of loan origination, as reported by the seller of the mortgage loan. (4) Unpaid principal balance of all loans with credit enhancement as a percentage of unpaid principal balance of single-family conventional guaranty book of business for which Fannie Mae has access to loan-level information. (5) Defaults include loan liquidations other than through voluntary pay-off or repurchase by lenders and include loan foreclosures, short sales, sales to third parties and deeds-in-lieu of foreclosure. Cumulative Default Rate is the total number of single-family conventional loans in the guaranty book of business originated in the identified year that have defaulted, divided by the total number of single-family conventional loans in the guaranty book of business originated in the identified year. For 2005 and earlier cumulative default rates, refer to slide 18.


 
11 As of December 31, 2014 Interest Only Loans Loans with FICO < 620 (2) Loans with FICO ≥ 620 and < 660 (2) Loans with Origination LTV Ratio > 90% Loans with FICO < 620 and Origination LTV Ratio > 90% Alt-A Loans (3) Refi Plus Including HARP (4) Subtotal of Certain Product Features (1) Overall Book Unpaid Principal Balance (billions) (5) $69.1 $69.3 $152.6 $444.0 $20.4 $116.6 $533.7 $1,006.0 $2,789.2 Share of Single-Family Conventional Guaranty Book 2.5% 2.5% 5.5% 15.9% 0.7% 4.2% 19.1% 36.1% 100.0% Average Unpaid Principal Balance (5) $232,468 $118,731 $132,213 $171,576 $132,327 $149,920 $160,938 $154,037 $159,997 Serious Delinquency Rate 9.39% 8.64% 5.95% 2.74% 9.41% 7.77% 0.71% 3.34% 1.89% Acquisition Years 2005 - 2008 81.3% 43.5% 35.3% 11.6% 33.1% 61.3%  19.7% 12.6% Weighted Average Origination Loan-to-Value Ratio 74.1% 81.4% 79.4% 104.6% 107.7% 77.9% 86.8% 85.1% 74.7% Origination Loan-to-Value Ratio > 90% 7.9% 29.5% 23.5% 100.0% 100.0% 14.7% 39.9% 44.1% 15.9% Weighted Average Mark-to-Market Loan-to-Value Ratio 86.4% 76.2% 73.5% 90.3% 98.2% 78.7% 71.2% 75.2% 64.0% Mark-to-Market Loan-to-Value Ratio > 100% and <= 125% 21.2% 12.6% 9.9% 14.0% 26.4% 15.7% 8.3% 8.8% 3.7% Mark-to-Market Loan-to-Value Ratio > 125% 8.9% 5.3% 4.1% 5.3% 12.9% 6.6% 2.6% 3.2% 1.3% Weighted Average FICO (2) 723 584 642 729 583 712 737 719 744 FICO < 620 (2) 1.5% 100.0%  4.6% 100.0% 2.4% 4.4% 6.9% 2.5% Fixed-rate 23.7% 82.6% 84.9% 95.1% 87.2% 65.0% 98.8% 88.6% 92.0% Primary Residence 85.4% 94.7% 93.0% 91.4% 94.5% 76.9% 84.9% 88.9% 88.1% Condo/Co-op 14.9% 4.8% 6.1% 10.1% 5.9% 9.9% 9.5% 9.0% 9.4% Credit Enhanced (6) 13.5% 23.7% 21.2% 59.7% 57.1% 11.1% 12.5% 29.3% 16.2% Categories Not Mutually Exclusive (1) (1) Loans with multiple product features are included in all applicable categories. The subtotal is calculated by counting a loan only once even if it is included in multiple categories. (2) FICO credit score is as of loan origination, as reported by the seller of the mortgage loan. (3) For a description of our Alt-A loan classification criteria, refer to Fannie Mae’s 2014 Form 10-K. (4) Our Refi Plus initiative, which started in April 2009, includes the Home Affordable Refinance Program (“HARP”). Our Refi Plus initiative provides expanded refinance opportunities for eligible Fannie Mae borrowers, and may involve the refinance of existing Fannie Mae loans with high loan-to-value ratios, including loans with loan-to-value ratios in excess of 100%. (5) Excludes non-Fannie Mae securities held in portfolio and those Alt-A and subprime wraps for which Fannie Mae does not have loan-level information. Fannie Mae had access to detailed loan-level information for approximately 99% of its single-family conventional guaranty book of business as of December 31, 2014. (6) Unpaid principal balance of all loans with credit enhancement as a percentage of unpaid principal balance of single-family conventional guaranty book of business for which Fannie Mae had access to loan-level information. Credit Characteristics of Single-Family Conventional Guaranty Book of Business by Certain Product Features