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fnm-20221231

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-K

☑ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2022

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number: 0-50231

Federal National Mortgage Association

(Exact name of registrant as specified in its charter)

Fannie Mae

Federally chartered corporation

52-0883107

1100 15th Street, NW

800

232-6643

Washington,

20005

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification No.)

(Address of principal executive offices, including zip code)

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
None	N/A	N/A

Securities registered pursuant to Section 12(g) of the Act:


Common Stock, without par value
8.25% Non-Cumulative Preferred Stock, Series T, stated value $25 per share
Fixed-to-Floating Rate Non-Cumulative Preferred Stock, Series S, stated value $25 per share
7.625% Non-Cumulative Preferred Stock, Series R, stated value $25 per share
6.75% Non-Cumulative Preferred Stock, Series Q, stated value $25 per share
Variable Rate Non-Cumulative Preferred Stock, Series P, stated value $25 per share
Variable Rate Non-Cumulative Preferred Stock, Series O, stated value $50 per share
5.375% Non-Cumulative Convertible Series 2004-1 Preferred Stock, stated value $100,000 per share
5.50% Non-Cumulative Preferred Stock, Series N, stated value $50 per share
4.75% Non-Cumulative Preferred Stock, Series M, stated value $50 per share
5.125% Non-Cumulative Preferred Stock, Series L, stated value $50 per share
5.375% Non-Cumulative Preferred Stock, Series I, stated value $50 per share
5.81% Non-Cumulative Preferred Stock, Series H, stated value $50 per share
Variable Rate Non-Cumulative Preferred Stock, Series G, stated value $50 per share
Variable Rate Non-Cumulative Preferred Stock, Series F, stated value $50 per share
5.10% Non-Cumulative Preferred Stock, Series E, stated value $50 per share
5.25% Non-Cumulative Preferred Stock, Series D, stated value $50 per share

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ¨ No þ

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. Yes ¨ No þ

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No ¨

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes þ No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☐

Accelerated filer

☑

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☑

If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐

Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☑

The aggregate market value of the common stock held by non-affiliates computed by reference to the closing price of the common stock quoted on the OTCQB on June 30, 2022 (the last business day of the registrant’s most recently completed second fiscal quarter) was approximately $498 million.

As of February 1, 2023, there were 1,158,087,567 shares of common stock of the registrant outstanding.


Table of Contents
		Page
PART I
Item 1.	Business	1
	Introduction	1
	Executive Summary	2
	Summary of Our Financial Performance	2
	Liquidity Provided in 2022	3
	Our Mission, Strategy and Charter	4
	Mortgage Securitizations	5
	Managing Mortgage Credit Risk	8
	Conservatorship and Treasury Agreements	10
	Legislation and Regulation	17
	Human Capital	28
	Where You Can Find Additional Information	30
	Forward-Looking Statements	30
Item 1A.	Risk Factors	33
	Risk Factors Summary	33
	GSE and Conservatorship Risk	35
	Credit Risk	41
	Operational Risk	46
	Liquidity and Funding Risk	51
	Market and Industry Risk	52
	Legal and Regulatory Risk	55
	General Risk	56
Item 1B.	Unresolved Staff Comments	57
Item 2.	Properties	57
Item 3.	Legal Proceedings	57
Item 4.	Mine Safety Disclosures	58
PART II
Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	59

Item 6.	[Reserved]	60
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	61
	Key Market Economic Indicators	61
	Consolidated Results of Operations	65
	Consolidated Balance Sheet Analysis	76
	Retained Mortgage Portfolio	78
	Guaranty Book of Business	80
	Business Segments	81
	Single-Family Business	82
	Single-Family Mortgage Market	84
	Single-Family Mortgage-Related Securities Issuances Share	85
	Single-Family Business Metrics	85
	Single-Family Business Financial Results	87
	Single-Family Mortgage Credit Risk Management	90
	Multifamily Business	111


Fannie Mae 2022 Form 10-K						i


	Multifamily Mortgage Market	114
	Multifamily Market Activity	115
	Multifamily Business Metrics	115
	Multifamily Business Financial Results	118
	Multifamily Mortgage Credit Risk Management	119
	Consolidated Credit Ratios and Select Credit Information	125
	Liquidity and Capital Management	126

	Risk Management	136
	Mortgage Credit Risk Management Overview	138
	Climate and Natural Disaster Risk Management	138
	Institutional Counterparty Credit Risk Management	141
	Market Risk Management, including Interest-Rate Risk Management	149
	Liquidity and Funding Risk Management	154
	Operational Risk Management	154
	Critical Accounting Estimates	155
	Impact of Future Adoption of New Accounting Guidance	158
	Glossary of Terms Used in This Report	158
Item 7A.	Quantitative and Qualitative Disclosures about Market Risk	161
Item 8.	Financial Statements and Supplementary Data	161
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	161
Item 9A.	Controls and Procedures	161
Item 9B.	Other Information	166
Item 9C.	Disclosure Regarding Foreign Jurisdictions that Prevent Inspections	166
PART III
Item 10.	Directors, Executive Officers and Corporate Governance	166
	Directors	166
	Corporate Governance	170
	ESG Matters	177
	Report of the Audit Committee of the Board of Directors	177
	Executive Officers	180
Item 11.	Executive Compensation	182
	Compensation Discussion and Analysis	182
	Compensation Committee Report	198
	Compensation Risk Assessment	199
	Compensation Tables and Other Information	200
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	210
Item 13.	Certain Relationships and Related Transactions, and Director Independence	211
	Policies and Procedures Relating to Transactions with Related Persons	211
	Transactions with Related Persons	213
	Director Independence	215
Item 14.	Principal Accounting Fees and Services	216
PART IV
Item 15.	Exhibits, Financial Statement Schedules	218
Item 16.	Form 10-K Summary	220
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS		F-1


Fannie Mae 2022 Form 10-K						ii


						Business \| Introduction

PART I



			We have been under conservatorship, with the Federal Housing Finance Agency (“FHFA”) acting as conservator, since September 6, 2008. As conservator, FHFA succeeded to all rights, titles, powers and privileges of the company, and of any shareholder, officer or director of the company with respect to the company and its assets. The conservator has since provided for the exercise of certain functions and authorities by our Board of Directors. Our directors owe their fiduciary duties of care and loyalty solely to the conservator. Thus, while we are in conservatorship, the Board has no fiduciary duties to the company or its stockholders.
			We do not know when or how the conservatorship will terminate, what further changes to our business will be made during or following conservatorship, what form we will have and what ownership interest, if any, our current common and preferred stockholders will hold in us after the conservatorship is terminated or whether we will continue to exist following conservatorship.
			We are not currently permitted to pay dividends or other distributions to stockholders. Our agreements with the U.S. Department of the Treasury (“Treasury”) include a commitment from Treasury to provide us with funds to maintain a positive net worth under specified conditions; however, the U.S. government does not guarantee our securities or other obligations. Our agreements with Treasury also include covenants that significantly restrict our business activities. For additional information on the conservatorship, the uncertainty of our future, and our agreements with Treasury, see “Business—Conservatorship and Treasury Agreements” and “Risk Factors—GSE and Conservatorship Risk.”

Forward-looking statements in this report are based on management’s current expectations and are subject to significant uncertainties and changes in circumstances, as we describe in “Business—Forward-Looking Statements.” Future events and our future results may differ materially from those reflected in our forward-looking statements due to a variety of factors, including those discussed in “Risk Factors” and elsewhere in this report.

You can find a “Glossary of Terms Used in This Report” in “Management’s Discussion and Analysis of Financial Condition and Results of Operations (‘MD&A’).”

Item 1. Business

Introduction

Fannie Mae is a leading source of financing for mortgages in the United States. Organized as a government-sponsored entity, Fannie Mae is a shareholder-owned corporation. We were chartered by Congress to provide liquidity and stability to the residential mortgage market and to promote access to mortgage credit. Our revenues are primarily driven by guaranty fees we receive for assuming the credit risk on loans underlying the mortgage-backed securities we issue. We do not originate loans or lend money directly to borrowers. Rather, we work primarily with lenders who originate loans to borrowers. We acquire and securitize those loans into mortgage-backed securities that we guarantee (which we refer to as Fannie Mae MBS or our MBS).


Fannie Mae 2022 Form 10-K						1


						Business \| Executive Summary

Executive Summary

Please read this summary together with our MD&A, our consolidated financial statements as of December 31, 2022 and the accompanying notes.

Summary of Our Financial Performance

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2022 vs. 2021

•Net revenues remained relatively flat in 2022 compared with 2021, as lower amortization income was offset by higher income from portfolios and higher base guaranty fee income.

◦Lower amortization income was driven by a higher interest rate environment in 2022, which slowed refinancing activity driving lower prepayment volumes compared with 2021.

◦Higher income from portfolios was primarily driven by higher yields on assets in our other investments portfolio as a result of increases in interest rates, as well as a decrease in interest expense on our long-term funding debt due to a decrease in the average outstanding balance; and

◦Higher base guaranty fee income was due to an increase in the size of our guaranty book of business and higher average charged guaranty fees.

•Net income decreased $9.3 billion in 2022 compared with 2021, primarily driven by a $11.4 billion shift to provision for credit losses in 2022 from a benefit for credit losses in 2021. Also contributing to the decline in net income was a $1.6 billion shift to investment losses in 2022 from investment gains in 2021. These decreases were partially offset by higher fair value gains.

◦Provision for credit losses in 2022 was due to:

•A single-family provision primarily driven by decreases in forecasted home prices, the overall credit risk profile of our newly acquired loans, and rising interest rates.

•A multifamily provision primarily driven by an increase in expected credit losses on our seniors housing portfolio, which has been disproportionately impacted by recent market conditions, as well as higher actual and projected interest rates.

◦Net investment losses in 2022 were primarily driven by a significant decrease in the market value of single-family loans, which resulted in valuation losses on loans held-for-sale as of December 31, 2022, as well as lower prices on loans sold during the year. Net investment gains in 2021 were driven by strong loan pricing coupled with a high volume of single-family loan sales during the year.


Fannie Mae 2022 Form 10-K						2


			Business \| Executive Summary

◦Fair value gains in 2022 were primarily driven by the impact of rising interest rates and widening of the secondary spread, which led to price declines. As a result of the price declines, we recognized gains on our commitments to sell mortgage-related securities and long-term debt of consolidated trusts held at fair value. These gains were partially offset by fair value losses on fixed-rate trading securities.

•Net worth increased by $12.9 billion in 2022 to $60.3 billion as of December 31, 2022. The increase is attributed to $12.9 billion of comprehensive income for the year ended December 31, 2022.

2021 vs. 2020

•Net revenues increased $4.6 billion in 2021 compared with 2020, driven by higher base guaranty fee income and higher amortization income partially offset by lower income from portfolios.

◦Higher base guaranty fee income was driven by the growth of our guaranty book of business along with higher average guaranty fees related to the loans in our book of business in 2021.

◦Higher amortization income was due to high prepayment volumes from loan refinancings as a result of the continued low interest-rate environment. The loans and associated debt of consolidated trusts that liquidated in 2021 also had larger unamortized deferred fees than those that liquidated in 2020.

◦Lower net interest income from our portfolios compared with 2020 was due to lower average balances and lower yields on our mortgage loans and securities partially offset by lower borrowing costs on our long-term funding debt.

•Net income increased $10.4 billion in 2021 compared with 2020, mainly due to higher net revenues as discussed above plus a shift from provision for credit losses in 2020 to a benefit for credit losses in 2021. Benefit for credit losses in 2021 was primarily driven by strong actual and forecasted home price growth, a benefit from the redesignation of certain nonperforming and reperforming loans and a reduction in our estimate of losses we expected to incur as a result of the COVID-19 pandemic, partially offset by a provision for higher actual and projected interest rates.

•Net worth increased by $22.1 billion in 2021 to $47.4 billion as of December 31, 2021. The increase is attributed to $22.1 billion of comprehensive income for the year ended December 31, 2021.

Liquidity Provided in 2022

Through our single-family and multifamily business segments, we provided $684 billion in liquidity to the mortgage market in 2022, which enabled the financing of approximately 2.6 million home purchases, refinancings and rental units.

Fannie Mae Provided $684 billion in Liquidity in 2022


Unpaid Principal Balance						Units

$378B						1,151K Single-Family Home Purchases

$237B						886K Single-Family Refinancings

$69B						598K Multifamily Rental Units

We continued our commitment to green financing in 2022, issuing a total of $9.1 billion in multifamily green MBS, $1.4 billion in single-family green MBS, and $781 million in multifamily green resecuritizations. We also issued $11.8 billion in multifamily social MBS and $773 million in multifamily social resecuritizations in 2022. These green and social bonds were issued in alignment with our Sustainable Bond Framework, which guides our issuances of green and social bonds that support energy and water efficiency and housing affordability. A portion of these bonds meet both program criteria and are included in each respective category.


Fannie Mae 2022 Form 10-K						3


						Business \| Our Mission, Strategy and Charter

Our Mission, Strategy and Charter

Our Mission and Strategy

Our mission is to facilitate equitable and sustainable access to homeownership and quality affordable rental housing across America.

We have developed a new strategic plan for 2023 to 2025 representing how we intend to achieve our mission and chartered purposes in a safe and sound manner. Our strategic plan includes the following foundational objectives and related priorities.


			Objectives						Related Priorities
			Improve Access to Equitable and Sustainable Housing: Build on our mission-first culture to deliver positive community outcomes that serve renters and homeowners.						•Advance greater equity in the housing finance system by removing significant barriers to quality affordable housing, particularly for historically underserved consumers.
									•Increase and preserve access to sustainable housing by maintaining inclusive credit standards, helping consumers navigate hardships, and supporting the housing ecosystem’s adaptation to climate change.
									•Increase efficiency, reduce frictions, and benefit borrowers and renters through lender, fintech, and other stakeholder engagements.
			Enhance our Financial and Risk Positions: Ensure that we are financially secure, can earn investable returns, and manage risk to the firm and the housing finance system.						•Improve our capabilities to price and manage our business to balance mission, housing goals, duties to serve, risk profile, returns, and securities performance.
									•Manage risk dynamically through changing market conditions, evolving risks, and the growing impacts of climate change.
									•Generate strong financial results and continue to build net worth.

This strategic plan remains subject to FHFA review and approval.

In addition, since 2012, FHFA has released annual corporate performance objectives for us, referred to as the conservatorship scorecard. For information on FHFA’s 2023 conservatorship scorecard objectives, see our Current Report on Form 8-K filed with the Securities and Exchange Commission (“SEC”) on January 10, 2023. For information on FHFA’s 2022 conservatorship scorecard objectives and our performance against these objectives, see “Executive Compensation—Determination of 2022 Compensation—Assessment of Corporate Performance against 2022 Scorecard.”

Our Charter

The Federal National Mortgage Association Charter Act (the “Charter Act”) establishes the parameters under which we operate and our purposes, which are to:

•provide stability in the secondary market for residential mortgages;

•respond appropriately to the private capital market;

•provide ongoing assistance to the secondary market for residential mortgages (including activities relating to mortgages on housing for low- and moderate-income families involving a reasonable economic return that may be less than the return earned on other activities) by increasing the liquidity of mortgage investments and improving the distribution of investment capital available for residential mortgage financing; and

•promote access to mortgage credit throughout the nation (including central cities, rural areas and underserved areas) by increasing the liquidity of mortgage investments and improving the distribution of investment capital available for residential mortgage financing.

The Charter Act specifies that our operations are to be financed by private capital to the maximum extent feasible. We are expected to earn reasonable economic returns on all our activities. However, we may accept lower returns on certain activities relating to mortgages on housing for low- and moderate-income families in order to support those segments of the market.


Fannie Mae 2022 Form 10-K						4


						Business \| Our Mission, Strategy and Charter

Principal balance limitations. To meet our purposes, the Charter Act authorizes us to purchase and securitize mortgage loans secured by single-family and multifamily properties. Our acquisitions of single-family conventional mortgage loans are subject to maximum original principal balance limits, known as “conforming loan limits.” The conforming loan limits are adjusted each year based on FHFA’s housing price index. In most of the U.S., the conforming loan limit for mortgages secured by one-family residences was set at $647,200 for 2022, and will increase to $726,200 for 2023. Higher limits apply for mortgages secured by two- to four-family residences and in four statutorily-designated states and territories (Alaska, Hawaii, Guam and the U.S. Virgin Islands). In addition, higher loan limits of up to 150% of the otherwise applicable loan limit apply in certain high-cost areas. The Charter Act does not impose maximum original principal balance limits on loans we purchase or securitize that are insured by the Federal Housing Administration (“FHA”) or guaranteed by the Department of Veterans Affairs (“VA”).

The Charter Act also includes the following provisions:

•Credit enhancement requirements. The Charter Act generally requires credit enhancement on any single-family conventional mortgage loan that we purchase or securitize that has a loan-to-value (“LTV”) ratio over 80% at the time of purchase. The credit enhancement may take the form of one or more of the following: (1) insurance or a guaranty by a qualified insurer on the portion of the unpaid principal balance of a mortgage loan that exceeds 80% of the property value; (2) a seller’s agreement to repurchase or replace the loan in the event of default; or (3) retention by the seller of at least a 10% participation interest in the loan. Regardless of LTV 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.

•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.

•Authority of Treasury to purchase our debt obligations. At the discretion of the Secretary of the Treasury, Treasury may purchase our debt obligations up to a maximum of $2.25 billion outstanding at any one time.

•Exemption for our securities offerings. Our securities offerings are exempt from registration requirements under the federal securities laws. As a result, we do not file registration statements or prospectuses with the SEC with respect to our securities offerings. However, our equity securities are not treated as exempt securities for purposes of Sections 12, 13, 14 or 16 of the Securities Exchange Act of 1934 (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. Our non-equity securities are exempt securities under the Exchange Act.

•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.

•Limitations. 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. We may purchase or securitize mortgage loans only on properties located in the United States and its territories.

Mortgage Securitizations

We support market liquidity by issuing Fannie Mae MBS that are readily traded in the capital markets. We create Fannie Mae MBS by placing mortgage loans in a trust and issuing securities that are backed by those mortgage loans. Monthly payments received on the loans are the primary source of payments passed through to Fannie Mae MBS holders. We guarantee to the MBS trust that we will supplement amounts received by the MBS trust as required to permit timely payment of principal and interest on the trust certificates. In return for this guaranty, we receive guaranty fees.

Below we discuss the three broad categories of our securitization transactions and the uniform mortgage-backed securities we issue.

Securitization Transactions

We currently securitize a substantial majority of the single-family and multifamily mortgage loans we acquire. Our securitization transactions primarily fall within three broad categories: lender swap transactions, portfolio securitizations, and structured securitizations.


Fannie Mae 2022 Form 10-K						5


						Business \| Mortgage Securitizations

Lender Swap Transactions

In a single-family “lender swap transaction,” a mortgage lender that operates in the primary mortgage market generally delivers a pool of mortgage loans to us in exchange for Fannie Mae MBS backed by these mortgage loans. Lenders may hold the Fannie Mae MBS they receive from us or sell them to investors. A pool of mortgage loans is a group of mortgage loans with similar characteristics. After receiving the mortgage loans in a lender swap transaction, we place them in a trust for which we serve as trustee. This trust is established for the sole purpose of holding the mortgage loans separate and apart from our corporate assets. We guarantee to each MBS trust that we will supplement amounts received by the MBS trust as required to permit timely payment of principal and interest on the related Fannie Mae MBS. We are entitled to a portion of the interest payment as a fee for providing our guaranty. The mortgage servicer also retains a portion of the interest payment as a fee for servicing the loan. Then, on behalf of the trust, we make monthly distributions to the Fannie Mae MBS certificateholders from the principal and interest payments and other collections on the underlying mortgage loans.

Lender Swap Transaction

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Our Multifamily business generally creates multifamily Fannie Mae MBS in lender swap transactions in a manner similar to our Single-Family business. Multifamily lenders typically deliver only one mortgage loan to back each multifamily Fannie Mae MBS. The characteristics of each mortgage loan are used to establish guaranty fees on a risk-adjusted basis. Securitizing a multifamily mortgage loan into a Fannie Mae MBS facilitates its sale into the secondary market.


Fannie Mae 2022 Form 10-K						6


						Business \| Mortgage Securitizations

Portfolio Securitization Transactions

We also purchase mortgage loans and mortgage-related securities for securitization and sale at a later date through our “portfolio securitization transactions.” Most of our portfolio securitization transactions are driven by our single-family whole loan conduit activities, pursuant to which we purchase single-family whole loans from a large group of typically small to mid-sized lenders principally for the purpose of securitizing the loans into Fannie Mae MBS, which may then be sold to dealers and investors.

Portfolio Securitization Transaction

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Structured Securitization Transactions

In a “structured securitization transaction,” we create structured Fannie Mae MBS, typically for lenders or securities dealers, in exchange for a transaction fee. In these transactions, the lender or dealer “swaps” a mortgage-related asset that it owns (typically a mortgage security) in exchange for a structured Fannie Mae MBS we issue. The process for issuing Fannie Mae MBS in a structured securitization is similar to the process involved in our lender swap securitizations described above.

We also issue structured transactions backed by multifamily Fannie Mae MBS through the Fannie Mae Guaranteed Multifamily Structures (“Fannie Mae GeMSTM”) program, which provides additional liquidity and stability to the multifamily market, while expanding the investor base for multifamily Fannie Mae MBS.

Uniform Mortgage-Backed Securities, or UMBS

Overview

Since 2019, we and Freddie Mac have each been issuing UMBS®, a uniform mortgage-backed security intended to maximize liquidity for both Fannie Mae and Freddie Mac mortgage-backed securities in the to-be-announced (“TBA”) market.

UMBS and Structured Securities

Each of Fannie Mae and Freddie Mac (the “GSEs”) issues and guarantees UMBS and structured securities backed by UMBS and other securities, as described below.

•UMBS. Each of Fannie Mae and Freddie Mac issues and guarantees UMBS that are directly backed by the mortgage loans it has acquired, referred to as “first-level securities.” UMBS issued by Fannie Mae are backed only by mortgage loans that Fannie Mae has acquired, and similarly UMBS issued by Freddie Mac are backed only by mortgage loans that Freddie Mac has acquired. There is no commingling of Fannie Mae- and Freddie Mac-acquired loans within UMBS.

Mortgage loans backing UMBS are limited to fixed-rate mortgage loans eligible for financing through the TBA market. We continue to issue some types of Fannie Mae MBS that are not TBA-eligible and therefore are not issued as UMBS, such as single-family Fannie Mae MBS backed by adjustable-rate mortgages and all multifamily Fannie Mae MBS.


Fannie Mae 2022 Form 10-K						7


						Business \| Mortgage Securitizations

•Structured Securities. Each of Fannie Mae and Freddie Mac also issues and guarantees structured mortgage-backed securities, referred to as “second-level securities,” that are resecuritizations of UMBS or previously-issued structured securities. In contrast to UMBS, second-level securities can be commingled—that is, they can include both Fannie Mae securities and Freddie Mac securities as the underlying collateral for the security. These structured securities include Supers®, which are single-class resecuritizations, and Real Estate Mortgage Investment Conduits (“REMICs”), which are multi-class resecuritizations. While Supers are backed only by TBA-eligible securities, REMICs can be backed by TBA-eligible or non-TBA-eligible securities.

In July 2022, we implemented a new upfront fee to create structured securities that include Freddie Mac securities, calculated as 50 basis points on the portion of the securities made up of Freddie Mac-issued collateral. Previously, there had been no fee to create these commingled securities. We implemented the fee to partially address the cost of capital we are required to hold to guarantee Freddie Mac’s securities. Freddie Mac implemented a similar fee.

On January 19, 2023, we, Freddie Mac and the Director of FHFA announced a reduction in this upfront fee for commingled securities to 9.375 basis points, effective April 1, 2023. In announcing the reduced fee, the Director of FHFA stated that FHFA is dedicated to preserving the strength and resilience of the UMBS market and committed to maintaining a durable framework that will enable commingling activity to resume in a way that addresses the concerns of all stakeholders to the greatest extent possible. She also stated that FHFA continues its review of the enterprise regulatory capital framework to ensure the framework appropriately reflects the risks of Fannie Mae’s and Freddie Mac’s business activities, including commingled securities.

The key features of UMBS are the same as those of legacy single-family Fannie Mae MBS. Accordingly, all single-family Fannie Mae MBS that are directly backed by fixed-rate loans and generally eligible for trading in the TBA market are considered UMBS, whether issued before or after the introduction of UMBS. In this report, we use the term “Fannie Mae-issued UMBS” to refer to single-family Fannie Mae MBS that are directly backed by fixed-rate mortgage loans and generally eligible for trading in the TBA market. We use the term “Fannie Mae MBS” or “our MBS” to refer to any type of mortgage-backed security that we issue, including UMBS, Supers, REMICs and other types of single-family or multifamily mortgage-backed securities. References to our single-family guaranty book of business in this report exclude Freddie Mac-acquired mortgage loans underlying Freddie Mac mortgage-related securities that we have resecuritized.

Common Securitization Platform

Certain aspects of the securitization process for our single-family Fannie Mae MBS issuances are performed by Common Securitization Solutions, LLC (“CSS”), which is a limited liability company we own jointly with Freddie Mac. CSS operates a common securitization platform, which was designed to allow for the potential integration of additional market participants in the future. In October 2021, FHFA announced its determination that CSS should focus on maintaining the resiliency of Fannie Mae’s and Freddie Mac’s mortgage-backed securities platform instead of expanding its role to serve a broader market.

We rely on the common securitization platform operated by CSS to securitize the single-family MBS we issue and for ongoing administrative functions for our single-family MBS. We do not use the common securitization platform for multifamily Fannie Mae MBS. See “Risk Factors—GSE and Conservatorship Risk” for a discussion of risks posed by our reliance on CSS.

Managing Mortgage Credit Risk

Effectively pricing and managing mortgage credit risk is key to our business. Below we discuss key elements of how we are compensated for and manage the risk of credit losses through the life cycle of our loans.

Loan Acquisition Policies

Loans we acquire must be underwritten in accordance with our guidelines and standards.

•In Single-Family, the substantial majority of loans we acquire are assessed by Desktop Underwriter® (DU®), our proprietary single-family automated underwriting system. DU performs a comprehensive evaluation of the primary risk factors of a mortgage. We regularly review DU’s underlying models to determine whether its risk analysis and eligibility assessment appropriately reflect current market conditions and loan performance data to ensure the loans we acquire are consistent with our risk appetite and FHFA guidance.


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•In Multifamily, we acquire the vast majority of our loans through our Delegated Underwriting and Servicing (DUS®) Program. DUS lenders, who must be pre-approved by us, are delegated the authority to underwrite and service loans for delivery to us in accordance with our standards and requirements. Based on a given loan’s unique characteristics and our established delegation criteria, lenders assess whether a loan must be reviewed by us. If review is required, our internal credit team will assess the loan’s risk profile to determine if it meets our risk tolerances. DUS lenders also share with us the risk of loss on our multifamily loans, thereby aligning our interests throughout the life of the loan. We closely monitor our multifamily loan acquisitions and market conditions and, as appropriate, make changes to our standards and requirements to ensure the amount and characteristics of the multifamily loans we acquire are consistent with our risk appetite and FHFA guidance, such as FHFA’s annual volume cap.

For more information about our mortgage acquisition policies and underwriting standards, see “MD&A—Single-Family Business—Single-Family Mortgage Credit Risk Management” and “MD&A—Multifamily Business—Multifamily Mortgage Credit Risk Management.”

In exchange for managing credit risk on the loans we acquire, we receive guaranty fees that take into account, among other factors, the credit risk characteristics of the loans we acquire. We provide information about our guaranty fees in “MD&A—Single-Family Business—Single-Family Business Metrics” and in “MD&A—Multifamily Business—Multifamily Business Metrics.”

Loan Performance Management

We closely monitor the performance of loans in our guaranty book of business and we work to reduce defaults and mitigate the severity of credit losses through our servicing policies and practices.

Single-Family Loans

•For single-family loans, the most important loan performance criteria we monitor are (1) serious delinquency rates, which are typically strong indicators of loans that are at a heightened risk of default, and (2) mark-to-market LTV ratios, which affect both the likelihood of losses and the potential severity of any losses we may ultimately realize. While mark-to-market LTV ratios are significantly impacted by changes in home prices, which are outside our control, we have an array of loss mitigation tools to try to reduce defaults on delinquent loans and to minimize the severity of the losses we do incur.

•We consider single-family loans to be seriously delinquent when they are 90 days or more past due or in the foreclosure process. Once a single-family loan becomes 36 days past due, the servicer is required to make weekly attempts, for the next six months, to contact the borrower to try to engage in steps to resolve the delinquency. Our loss mitigation tools include payment forbearance, repayment plans, payment deferrals and loan modifications. We describe these tools and discuss them further in “MD&A—Single-Family Business—Single-Family Mortgage Credit Risk Management—Single-Family Problem Loan Management.” Successful loan reperformance is heavily influenced by the effective use of these tools and the amount of equity the borrower has in their home.

•For delinquent loans that are unable to reperform, we use alternatives to foreclosure where possible, such as short sales, which generally reduce our credit losses while helping borrowers avoid foreclosure. We provide more information on short sales and our other foreclosure alternatives in “MD&A—Single-Family Business—Single-Family Mortgage Credit Risk Management—Single-Family Problem Loan Management—Loan Workout Metrics—Foreclosure Alternatives.” When we acquire properties, including through foreclosure, our primary objectives are to facilitate equitable and sustainable access to homeownership, quality affordable rental housing, and housing for owner occupant and community-minded purchasers, while obtaining the highest price possible. The value of the underlying property relative to the loan’s unpaid principal balance has a significant impact on the severity of loss we incur as a result of loan default. We provide information on the mark-to-market LTV ratio of loans in our single-family conventional book of business in “MD&A—Single-Family Business—Single-Family Mortgage Credit Risk Management—Single-Family Portfolio Diversification and Monitoring.”

•We present additional information on the credit characteristics and performance of our single-family loans in “MD&A—Single-Family Business—Single-Family Mortgage Credit Risk Management” and “Note 13, Concentrations of Credit Risk—Risk Characteristics of our Guaranty Book of Business.”

Multifamily Loans

•For multifamily loans, key indicators of credit risk are debt service coverage ratios (“DSCRs”) and delinquency rates. Loans with lower DSCRs, particularly loans with an estimated current DSCR below 1.0, and seriously


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delinquent loans indicate a heightened risk of default. We consider a multifamily loan seriously delinquent when it is 60 days or more past due.

•For loans with indicators of heightened default risk, our DUS lenders work with us to help maintain the credit quality of the multifamily guaranty book of business and prevent foreclosures through loss mitigation strategies such as payment forbearance or loan modification.

•For loans that ultimately default, we work to minimize the severity of loss in several ways, including pursuing contractual remedies through our DUS loss-sharing arrangements and with providers of additional credit enhancements where available.

•We may offer forbearance for borrowers experiencing temporary challenges, like natural disasters and financial hardship.

•We present information on the credit characteristics and performance of our multifamily loans in “MD&A—Multifamily Business—Multifamily Mortgage Credit Risk Management” and “Note 13, Concentrations of Credit Risk—Risk Characteristics of our Guaranty Book of Business.”

Sharing and Selling Credit Risk

In addition to managing credit risk through our selling and servicing practices, we also share and transfer credit risk to third parties through a variety of credit enhancement products and programs.

•For single-family loans we acquire with an LTV ratio over 80% our charter generally requires credit enhancement, which we typically meet through third-party primary mortgage insurance.

•Our Multifamily business uses a shared-risk business model that distributes credit risk to the private markets, primarily through our DUS program. Under DUS, our multifamily lenders typically share with us approximately one-third of the credit risk on these loans, aligning the interests of lenders and Fannie Mae. DUS lenders receive credit-risk-related compensation in exchange for sharing risk. The lender risk-sharing we obtain through our DUS program accompanies our multifamily loans at the time we acquire them.

•We use other types of credit enhancements, including pool mortgage insurance and credit risk transfer transactions. In our credit risk transfer transactions, we use risk-sharing capabilities we have developed to obtain credit enhancement by transferring portions of our single-family and multifamily mortgage credit risk on reference pools of mortgage loans to the private market. Our credit risk transfer transactions effectively reduce the guaranty fee income we retain on the loans covered by the transactions, as a portion of the guaranty fee on the loans is paid to investors as compensation for taking a share of the credit risk. Our credit risk transfer transactions are designed to transfer to the investors, in exchange for these payments, a portion of the losses we expect would be incurred in an economic downturn or a stressed credit environment.

For more information about our loans with credit enhancement, see “MD&A—Single-Family Business—Single-Family Mortgage Credit Risk Management—Single-Family Credit Enhancement and Transfer of Mortgage Credit Risk” and “MD&A—Multifamily Business—Multifamily Mortgage Credit Risk Management.” See “Risk Factors—Credit Risk” for discussion of the mortgage credit risks we face.

Conservatorship and Treasury Agreements

Conservatorship

On September 6, 2008, the Director of FHFA appointed FHFA as our conservator, pursuant to authority provided by the Federal Housing Enterprises Financial Safety and Soundness Act of 1992, as amended, including by the Housing and Economic Recovery Act of 2008 (together, the “GSE Act”). The conservatorship is a statutory process designed to preserve and conserve our assets and property and put the company in a sound and solvent condition.

The conservatorship has no specified termination date. For more information on the risks to our business relating to the conservatorship and uncertainties regarding the future of our company and business, as well as the adverse effects of the conservatorship on the rights of holders of our common and preferred stock, see “Risk Factors—GSE and Conservatorship Risk.”

Our conservatorship could terminate through a receivership. For information on the circumstances under which FHFA is required or permitted to place us into receivership and the potential consequences of receivership, see “Legislation and Regulation—GSE-Focused Matters—Receivership” and “Risk Factors—GSE and Conservatorship Risk.”


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Management of the Company during Conservatorship

Upon its appointment, the conservator immediately succeeded to (1) all rights, titles, powers and privileges of Fannie Mae, and of any shareholder, officer or director of Fannie Mae with respect to Fannie Mae and its assets, and (2) title to the books, records and assets of any other legal custodian of Fannie Mae. The conservator subsequently issued an order that provided for our Board of Directors to exercise specified functions and authorities. The conservator also provided instructions regarding matters for which conservator decision or notification is required. The conservator retains the authority to amend or withdraw its order and instructions at any time. For more information on the functions and authorities of our Board of Directors during conservatorship, see “Directors, Executive Officers and Corporate Governance—Corporate Governance—Conservatorship and Board Authorities.”

Our directors serve on behalf of the conservator and exercise their authority as directed by and with the approval, where required, of the conservator. Our directors owe their fiduciary duties of care and loyalty solely to the conservator. Thus, while we are in conservatorship, the Board has no fiduciary duties to the company or its stockholders.

Because we are in conservatorship, our common stockholders currently do not have the ability to elect directors or to vote on other matters. The conservator eliminated common and preferred stock dividends (other than dividends on the senior preferred stock issued to Treasury) during the conservatorship.

Powers of the Conservator under the GSE Act

FHFA has broad powers when acting as our conservator. As conservator, FHFA can direct us to enter into contracts or enter into contracts on our behalf. Further, FHFA may transfer or sell any of our assets or liabilities (subject to limitations and post-transfer notice provisions for transfers of certain types of financial contracts), without any approval, assignment of rights or consent of any party. However, mortgage loans and mortgage-related assets that have been transferred to a Fannie Mae MBS trust must be held by the conservator for the beneficial owners of the Fannie Mae MBS and cannot be used to satisfy the general creditors of the company. Neither the conservatorship nor the terms of our agreements with Treasury change our obligation to make required payments on our debt securities or perform under our mortgage guaranty obligations.

A Supreme Court decision in June 2021, in Collins et al. v. Yellen, Secretary of the Treasury, et al., held that the President has the power to remove the Director of FHFA for any reason, not just for cause. The Supreme Court’s opinion in Collins v. Yellen also included an expansive interpretation of FHFA’s authority as conservator under the Housing and Economic Recovery Act of 2008, noting that “when the FHFA acts as a conservator, it may aim to rehabilitate the regulated entity in a way that, while not in the best interests of the regulated entity, is beneficial to the Agency and, by extension, the public it serves.” See “Risk Factors—GSE and Conservatorship Risk” for a discussion of the risks relating to conservatorship.

Treasury Agreements

On September 7, 2008, Fannie Mae, through FHFA in its capacity as conservator, entered into a senior preferred stock purchase agreement with Treasury, pursuant to which we issued to Treasury one million shares of Variable Liquidation Preference Senior Preferred Stock, Series 2008-2, which we refer to as the “senior preferred stock,” and a warrant to purchase shares of common stock equal to 79.9% of the total number of shares of our common stock outstanding on a fully diluted basis at the time the warrant is exercised for a nominal price. The senior preferred stock purchase agreement and the dividend and liquidation provisions of the senior preferred stock have been amended multiple times, most recently in January 2021, pursuant to a letter agreement between us, through FHFA in its capacity as conservator, and Treasury. Some provisions added to the agreement in January 2021 were subsequently temporarily suspended pursuant to a September 2021 letter agreement. Below we discuss the terms of the senior preferred stock purchase agreement and the senior preferred stock as they are currently in effect. See “Risk Factors—GSE and Conservatorship Risk” for a description of the risks to our business relating to the senior preferred stock purchase agreement, as well as the adverse effects of the senior preferred stock and the warrant on the rights of holders of our common stock and other series of preferred stock.

Senior Preferred Stock Purchase Agreement

Funds Available for Draw

The senior preferred stock purchase agreement provides that, on a quarterly basis, we may draw funds up to the amount, if any, by which our total liabilities exceed our total assets, as reflected in our consolidated balance sheet, prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”), for the applicable fiscal quarter (referred to as the “deficiency amount”), up to the maximum amount of remaining funding under the agreement. As of the date of this filing, the maximum amount of remaining funding under the agreement is $113.9 billion. If we were to draw additional funds from Treasury under the agreement with respect to a future period, the


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amount of remaining funding under the agreement would be reduced by the amount of our draw. The senior preferred stock purchase agreement provides that the deficiency amount will be calculated differently if we become subject to receivership or other liquidation process.

Commitment Fee and Capital Reserve End Date

The senior preferred stock purchase agreement provides for the payment of an unspecified quarterly commitment fee to Treasury to compensate Treasury for its ongoing support under the senior preferred stock purchase agreement. The amount of this fee, as well as a number of the agreement’s other terms and the terms of the senior preferred stock, depend on whether we have reached the “capital reserve end date,” which is defined as the last day of the second consecutive fiscal quarter during which we have had and maintained capital equal to, or in excess of, all of the capital requirements and buffers under the enterprise regulatory capital framework, which is discussed in “Legislation and Regulation—GSE-Focused Matters—Capital Requirements.” Under the agreement, (1) through and continuing until the capital reserve end date, the periodic commitment fee will not be set, accrue, or be payable, and (2) not later than the capital reserve end date, we and Treasury, in consultation with the Chair of the Federal Reserve, will agree to set the periodic commitment fee. Treasury’s funding commitment under the senior preferred stock purchase agreement has no expiration date. The agreement provides that Treasury’s funding commitment will terminate under any of the following circumstances: (1) the completion of our liquidation and fulfillment of Treasury’s obligations under its funding commitment at that time; (2) the payment in full of, or reasonable provision for, all of our liabilities (whether or not contingent, including mortgage guaranty obligations); or (3) the funding by Treasury of the maximum amount that may be funded under the agreement. In addition, Treasury may terminate its funding commitment and declare the agreement null and void if a court vacates, modifies, amends, conditions, enjoins, stays or otherwise affects the appointment of the conservator or otherwise curtails the conservator’s powers.

Debt and MBS Holders

If we default on payments with respect to our debt securities or guaranteed Fannie Mae MBS and Treasury fails to perform its obligations under its funding commitment, and if we and/or the conservator are not diligently pursuing remedies in respect of that failure, the senior preferred stock purchase agreement provides that any holder of such defaulted debt securities or Fannie Mae MBS may file a claim in the United States Court of Federal Claims for relief requiring Treasury to fund us up to (1) the amount necessary to cure the payment defaults on our debt and Fannie Mae MBS, (2) the deficiency amount, or (3) the amount of remaining funding under the senior preferred stock purchase agreement, whichever is the least. Any payment that Treasury makes under those circumstances would be treated for all purposes as a draw under the senior preferred stock purchase agreement that would increase the liquidation preference of the senior preferred stock.

Most provisions of the senior preferred stock purchase agreement may be waived or amended by mutual agreement of the parties; however, no waiver or amendment of the agreement is permitted that would decrease Treasury’s aggregate funding commitment or add conditions to Treasury’s funding commitment if the waiver or amendment would adversely affect in any material respect the holders of our debt securities or guaranteed Fannie Mae MBS.

Senior Preferred Stock

Dividend Provisions

Treasury, as the holder of the senior preferred stock, is entitled to receive, when, as and if declared, out of legally available funds, cumulative quarterly cash dividends. The dividends we have paid to Treasury on the senior preferred stock during conservatorship have been declared by, and paid at the direction of, our conservator, acting as successor to the rights, titles, powers and privileges of the Board of Directors. Dividend payments we make to Treasury do not restore or increase the amount of funding available to us under the senior preferred stock purchase agreement.

The dividend provisions of the senior preferred stock were amended pursuant to the January 2021 letter agreement to permit us to retain increases in our net worth until our net worth exceeds the amount of adjusted total capital necessary for us to meet the capital requirements and buffers under the enterprise regulatory capital framework. As described more fully below, after the capital reserve end date, the amount of quarterly dividends to Treasury will be equal to the lesser of any quarterly increase in our net worth and a 10% annual rate on the then-current liquidation preference of the senior preferred stock. As a result of these provisions, our ability to retain earnings in excess of the capital requirements and buffers set forth in the enterprise regulatory capital framework will be limited.

Dividend Amount Prior to Capital Reserve End Date

The terms of the senior preferred stock provide for dividends each quarter in the amount, if any, by which our net worth as of the end of the immediately preceding fiscal quarter exceeds an applicable capital reserve amount. The January 2021 letter agreement increased the applicable capital reserve amount, starting with the quarterly dividend period


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ending on December 31, 2020, from $25 billion to the amount of adjusted total capital necessary for us to meet the capital requirements and buffers set forth in the enterprise regulatory capital framework. If our net worth does not exceed this amount as of the end of the immediately preceding fiscal quarter, then dividends will neither accumulate nor be payable for such period. Our net worth is defined as the amount, if any, by which our total assets (excluding Treasury’s funding commitment and any unfunded amounts related to the commitment) exceed our total liabilities (excluding any obligation with respect to capital stock), in each case as reflected on our balance sheet prepared in accordance with GAAP.

Dividend Amount Following Capital Reserve End Date

Beginning on the first dividend period following the capital reserve end date, the applicable quarterly dividend amount on the senior preferred stock will be the lesser of:

(1) a 10% annual rate on the then-current liquidation preference of the senior preferred stock; and

(2) an amount equal to the incremental increase in our net worth during the immediately prior fiscal quarter.

However, the applicable quarterly dividend amount will immediately increase to a 12% annual rate on the then-current liquidation preference of the senior preferred stock if we fail to timely pay dividends in cash to Treasury. This increased dividend amount will continue until the dividend period following the date we have paid, in cash, full cumulative dividends to Treasury (including any unpaid dividends), at which point the applicable quarterly dividend amount will revert to the prior calculation method.

Liquidation Preference

Shares of the senior preferred stock have no par value and have a stated value and initial liquidation preference equal to $1,000 per share, for an aggregate initial liquidation preference of $1 billion.

Under the terms that currently govern the senior preferred stock, the aggregate liquidation preference will be increased by the following:

•any amounts Treasury pays to us pursuant to its funding commitment under the senior preferred stock purchase agreement (as of the date of this filing, the cumulative amount Treasury has paid to us under its funding commitment is $119.8 billion);

•any quarterly commitment fees that are payable but not paid in cash (no such fees have become payable, nor will such fees be set until the capital reserve end date);

•any dividends that are payable but not paid in cash to Treasury, regardless of whether or not they are declared; and

•at the end of each fiscal quarter through and including the capital reserve end date, an amount equal to the increase in our net worth, if any, during the immediately prior fiscal quarter.

The aggregate liquidation preference of the senior preferred stock was $180.3 billion as of December 31, 2022. It will increase to $181.8 billion as of March 31, 2023 due to the $1.4 billion increase in our net worth during the fourth quarter of 2022.

The senior preferred stock ranks ahead of our common stock and all other outstanding series of our preferred stock, as well as any capital stock we issue in the future, as to both dividends and rights upon liquidation. As a result, if we are liquidated, the holder of the senior preferred stock is entitled to its then current liquidation preference before any distribution is made to the holders of our common stock or other preferred stock.

Limitations on Redemption and Paydown of Liquidation Preference; Requirement to Pay Net Proceeds of Capital Stock Issuances to Reduce Liquidation Preference

We are not permitted to redeem the senior preferred stock prior to the termination of Treasury’s funding commitment under the senior preferred stock purchase agreement. Moreover, we are not permitted to pay down the liquidation preference of the outstanding shares of senior preferred stock except to the extent of (1) accumulated and unpaid dividends previously added to the liquidation preference and not previously paid down; and (2) quarterly commitment fees previously added to the liquidation preference and not previously paid down. In addition to these exceptions, if we issue any shares of capital stock for cash while the senior preferred stock is outstanding, the net proceeds of the issuance, with the exception of up to $70 billion in aggregate gross cash proceeds from the issuance of common stock, must be used to pay down the liquidation preference of the senior preferred stock. As described below under “Covenants under Treasury Agreements,” we may issue common stock ranking pari passu or junior to the common stock issued to Treasury in connection with the exercise of its warrant provided that (i) Treasury has already exercised its warrant in full, and (ii) all currently pending significant litigation relating to the conservatorship and the August 2012 amendment to the senior preferred stock purchase agreement has been resolved. The liquidation preference of each


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share of senior preferred stock may not be paid down below $1,000 per share prior to the termination of Treasury’s funding commitment. Following the termination of Treasury’s funding commitment, we may pay down the liquidation preference of all outstanding shares of senior preferred stock at any time, in whole or in part.

Additional Senior Preferred Stock Provisions

The senior preferred stock provides that we may not, at any time, declare or pay dividends on, make distributions with respect to, or redeem, purchase or acquire, or make a liquidation payment with respect to, any common stock or other securities ranking junior to the senior preferred stock unless (1) full cumulative dividends on the outstanding senior preferred stock (including any unpaid dividends added to the liquidation preference) have been declared and paid in cash, and (2) all amounts required to be paid with the net proceeds of any issuance of capital stock for cash (as described in the preceding paragraph) have been paid in cash. Shares of the senior preferred stock are not convertible. Shares of the senior preferred stock have no general or special voting rights, other than those set forth in the certificate of designation for the senior preferred stock or otherwise required by law. The consent of holders of at least two-thirds of all outstanding shares of senior preferred stock is generally required to amend the terms of the senior preferred stock or to create any class or series of stock that ranks prior to or on parity with the senior preferred stock.

Common Stock Warrant

Pursuant to the senior preferred stock purchase agreement, on September 7, 2008, we, through FHFA in its capacity as conservator, issued to Treasury a warrant to purchase shares of our common stock equal to 79.9% of the total number of shares of our common stock outstanding on a fully diluted basis on the date the warrant is exercised, for an exercise price of $0.00001 per share. The warrant may be exercised in whole or in part at any time on or before September 7, 2028.

Covenants under Treasury Agreements

The senior preferred stock purchase agreement contains covenants that prohibit us from taking a number of actions without the prior written consent of Treasury, including:

•paying dividends or other distributions on or repurchasing our equity securities (other than the senior preferred stock or warrant);

•issuing equity securities, except for stock issuances made (1) to Treasury, (2) pursuant to obligations that existed at the time we entered conservatorship, and (3) as amended by the January 2021 letter agreement, for common stock ranking pari passu or junior to the common stock issued to Treasury in connection with the exercise of its warrant, provided that (i) Treasury has already exercised its warrant in full, and (ii) all currently pending significant litigation relating to the conservatorship and the August 2012 amendment to the senior preferred stock purchase agreement has been resolved, which may require Treasury’s assent. Net proceeds of the issuance of any shares of capital stock for cash while the senior preferred stock is outstanding, except for up to $70 billion in aggregate gross cash proceeds from the issuance of common stock, must be used to pay down the liquidation preference of the senior preferred stock;

•terminating or seeking to terminate our conservatorship, other than through a receivership, except that, as revised by the January 2021 letter agreement, FHFA can terminate our conservatorship without the prior consent of Treasury if several conditions are met, including (1) all currently pending significant litigation relating to the conservatorship and the August 2012 amendment to the senior preferred stock purchase agreement has been resolved, and (2) for two or more consecutive quarters, our common equity tier 1 capital (as defined in the enterprise regulatory capital framework), together with any stockholder equity that would result from a firm commitment public underwritten offering of common stock which is fully consummated concurrent with the termination of conservatorship, equals or exceeds at least 3% of our adjusted total assets (as defined in the enterprise regulatory capital framework);

•selling, transferring, leasing or otherwise disposing of any assets, except for dispositions for fair market value in limited circumstances including if (a) the transaction is in the ordinary course of business and consistent with past practice or (b) the assets have a fair market value individually or in the aggregate of less than $250 million; and

•issuing subordinated debt.

Covenants in the senior preferred stock purchase agreement also subject us to limits on the amount of mortgage assets that we may own and the total amount of our indebtedness.

•Mortgage Asset Limit. The senior preferred stock purchase agreement limits the amount of mortgage assets we are permitted to own to $225 billion. We are currently managing our business to a $202.5 billion mortgage asset cap pursuant to instructions from FHFA. Our mortgage assets as of December 31, 2022 were


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$79.5 billion, which includes 10% of the notional value of interest-only securities we hold. We disclose the amount of our mortgage assets each month in the “Endnotes” to our Monthly Summaries, which are available on our website and announced in a press release.

•Debt Limit. Our debt limit under the senior preferred stock purchase agreement is set at 120% of the amount of mortgage assets we were allowed to own under the agreement on December 31 of the immediately preceding calendar year. This debt limit is currently $270 billion. As calculated for this purpose, our indebtedness as of December 31, 2022 was $139.3 billion. We disclose the amount of our indebtedness on a monthly basis under the caption “Total Debt Outstanding” in our Monthly Summaries.

Compensation. Another covenant prohibits us from entering into any new compensation arrangements or increasing amounts or benefits payable under existing compensation arrangements with any of our executive officers (as defined by SEC rules) without the consent of the Director of FHFA, in consultation with the Secretary of the Treasury.

Annual Risk Management Plan Covenant. Each year we remain in conservatorship we are required to provide Treasury a risk management plan that sets out our strategy for reducing our risk profile, describes the actions we will take to reduce the financial and operational risk associated with each of our business segments, and includes an assessment of our performance against the planned actions described in the prior year’s plan. We submitted our most recent risk management plan to Treasury in December 2022.

Covenants Added in January 2021 and Currently in Effect

In addition to the changes described above to covenants already in the senior preferred stock purchase agreement, the January 2021 letter agreement added the following additional covenants that are currently in effect:

•Enterprise Regulatory Capital Framework. We are required to comply with the enterprise regulatory capital framework rule published by FHFA in the Federal Register on December 17, 2020, disregarding any subsequent amendments or modifications to the rule.

As described in “Legislation and Regulation—GSE-Focused Matters—Capital Requirements” below, FHFA published additional final rules amending the enterprise regulatory capital framework in 2022. FHFA has instructed us to report our capital requirements under the amended enterprise regulatory capital framework, not under the original requirements of the framework published in December 2020. Accordingly, we are not in compliance with this covenant. Although our compliance with the covenants in the senior preferred stock purchase agreement is not a condition of Treasury’s funding commitment under that agreement, FHFA, as our conservator and regulator, has the authority to direct compliance or impose consequences for any non-compliance with that agreement.

•New Business Restrictions. The following additional restrictive covenants that relate to our single-family business activities:

◦Requirement to Provide Equitable Access for Single-Family Acquisitions. We:

▪may not vary our pricing or acquisition terms for single-family loans based on the business characteristics of the seller, including the seller’s size, charter type, or volume of business with us; and

▪must offer to purchase at all times, for equivalent cash consideration and on substantially the same terms, any single-family mortgage loan that (1) is of a class of loans that we then offer to acquire for inclusion in our mortgage-backed securities or for other non-cash consideration, (2) is offered by a seller that has been approved to do business with us, and (3) has been originated and sold in compliance with our underwriting standards.

◦Single-Family Loan Eligibility Requirements Program. We are required to maintain a program reasonably designed to ensure that the single-family loans we acquire are limited to:

▪qualified mortgages, except government-backed loans;

▪loans exempt from the Consumer Financial Protection Bureau’s (the “CFPB’s”) ability-to-repay and qualified mortgage rule, except timeshares and home equity lines of credit;

▪loans secured by an investment property;

▪refinancing loans with streamlined underwriting originated in accordance with our eligibility criteria for high loan-to-value refinancings;

▪loans originated with temporary underwriting flexibilities during times of exigent circumstances, as determined in consultation with FHFA;


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▪loans secured by manufactured housing; and

▪such other loans that FHFA may designate that were eligible for purchase by us as of the date of the January 2021 letter agreement.

Covenants Added in January 2021 and Temporarily Suspended in September 2021

The business restrictions described below were added to the senior preferred stock purchase agreement as a result of the January 2021 letter agreement and subsequently temporarily suspended pursuant to a letter agreement dated September 14, 2021. Under the terms of the September 2021 letter agreement, the suspension of these provisions will terminate six months after Treasury so notifies us. As of the date of this filing, we have not received a notification from Treasury regarding the termination of these suspensions. Although the restrictions on these activities under the senior preferred stock purchase agreement are temporarily suspended, in the ordinary course of business these and other business activities are subject to constraints from a variety of sources, including board- and management-approved risk limits, capital considerations and FHFA instructions. These suspended restrictions are as follows:

•Single Counterparty Volume Cap on Single-Family Acquisitions for Cash. This suspended provision would require that we not acquire more than $1.5 billion in single-family loans for cash consideration from any single seller (including its affiliates) during any period comprising four calendar quarters. Loan acquisitions through lender swap securitization transactions would not be subject to this limitation.

•Limit on Multifamily Volume. This suspended provision would require that we not acquire more than $80 billion in multifamily mortgage assets in any 52-week period, with this multifamily volume cap to be adjusted up or down by FHFA at the end of each calendar year based on changes to the consumer price index. Additionally, at least 50% of our multifamily acquisitions in any calendar year must, at the time of acquisition, be classified as mission-driven, consistent with FHFA guidelines. Although this provision has been suspended, FHFA has established a cap on our new multifamily business volume and required that a minimum portion of our multifamily business volume be mission-driven, focused on certain affordable and underserved market segments. For more information on our multifamily volume cap, see “Legislation and Regulation—GSE-Focused Matters—Multifamily Business Volume Cap” and “MD&A—Multifamily Business—Multifamily Business Metrics.”

•Limit on Specified Higher-Risk Single-Family Acquisitions. This suspended provision would prohibit our acquisition of a single-family mortgage loan if, following the acquisition, more than 3% of our single-family loans that result from a refinancing or 6% of our single-family loans that do not result from a refinancing would have two or more of the higher-risk characteristics listed below at origination. The 3% and 6% measurements would each be based on loans we acquired during the preceding 52-week period. The higher-risk characteristics are:

•a combined loan-to-value ratio greater than 90%;

•a debt-to-income ratio greater than 45%; and

•a FICO credit score (or equivalent credit score) less than 680.

•Limit on Acquisitions of Single-Family Mortgage Loans Backed by Second Homes and Investment Properties. This suspended provision would require that we limit our acquisitions of single-family mortgage loans secured by either second homes or investment properties to not more than 7% of the single-family mortgage loans we have acquired during the preceding 52-week period.

Equitable Housing Finance Plan

In September 2021, FHFA instructed Fannie Mae and Freddie Mac to submit Equitable Housing Finance Plans to FHFA by the end of 2021. We publicly released our first Equitable Housing Finance Plan in June 2022. Consistent with the GSE Act, the plan provides a three-year roadmap for our actions to advance equity in housing finance by working to remove barriers to affordable rental housing and homeownership experienced by members of underserved populations, particularly racial and ethnic groups with a significant homeownership rate disparity. Fannie Mae’s Equitable Housing Finance Plan focuses on empowering Black renters and homeowners in three key areas:

•Housing Preparation: Helping Black consumers prepare early for sustainable homeownership and access to quality rental housing through credit building and financial education.

•Buying or Renting: Removing unnecessary obstacles Black people face in shopping for, acquiring, renting, or mortgaging a home.

•Moving in and Maintaining: Enhancing sustainable homeownership so that renters and homeowners can withstand disruptions or temporary hardships and remain stably housed.


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FHFA is also requiring Fannie Mae and Freddie Mac to submit annual progress reports on the actions undertaken during the prior year to implement their plans.

We are focusing in this initial plan on the needs of Black homeowners and renters, a population for whom inequities caused by past discriminatory housing practices are particularly profound. Based on data from the Census Bureau’s 2019 American Community Survey, the Black homeownership rate is estimated to be approximately 30 percentage points lower than the white homeownership rate. While our solutions seek to address key obstacles that Black homeowners and renters face as they secure housing, we expect they will benefit borrowers and renters in all populations. In the future, we expect to expand the focus of our equitable housing efforts to address challenges faced by other populations who have been historically underserved by the housing finance system, including Latino homeowners and renters.

In connection with our Equitable Housing Finance Plan and in support of other efforts we may undertake to support equitable housing, we anticipate establishing and supporting special purpose credit programs. We launched a special purpose credit program pilot with a number of lenders in 2022 and anticipate expanding this pilot with additional lenders in 2023. Under the Equal Credit Opportunity Act, creditors can create special purpose credit programs for groups that have been historically disadvantaged in obtaining credit. Special purpose credit programs benefit applicants who would otherwise be denied credit or receive it on less favorable terms.

Legislation and Regulation

As a federally chartered corporation and as a financial institution, we are subject to government regulation and oversight. FHFA, our primary regulator, regulates our safety and soundness and our mission, and also acts as our conservator. FHFA is an independent agency of the federal government with general supervisory and regulatory authority over Fannie Mae, Freddie Mac and the Federal Home Loan Banks (“FHLBs”). The U.S. Department of Housing and Urban Development (“HUD”) and FHFA regulate us with respect to fair lending matters. Our regulators also include the SEC and Treasury. In addition, even if we are not directly subject to an agency’s regulation or oversight, regulations by that agency that affect mortgage lenders and servicers, debt investors, or the markets for our MBS or debt securities could have a significant impact on us.

Housing Finance Reform

The Administration and Congress may consider housing finance reforms or legislation that could result in significant changes in our structure and role in the future, including proposals that would result in Fannie Mae’s liquidation or dissolution. There continues to be significant uncertainty regarding the timing, content and impact of future legislative and regulatory actions affecting us. See “Risk Factors—GSE and Conservatorship Risk” for a description of risks associated with our future and potential housing finance reform.

GSE-Focused Matters

We describe below matters applicable specifically to Fannie Mae. These matters relate to legislation, regulation or, in some cases, conservatorship. In the following section, we describe matters that are applicable more broadly or to other mortgage or capital market participants and that may directly or indirectly affect us.

Capital Requirements

In December 2020, FHFA published a final rule establishing a new enterprise regulatory capital framework for Fannie Mae and Freddie Mac. FHFA published three additional final rules amending the enterprise regulatory capital framework in March 2022 and June 2022. The March 2022 amendment refined the prescribed leverage buffer amount and the risk-based capital treatment of credit risk transfer transactions, as well as implemented technical corrections. The June 2022 amendments introduced new public disclosure requirements and a requirement to submit annual capital plans to FHFA and provide prior notice to FHFA for certain capital actions. We refer to the rule’s requirements, as amended, as the “enterprise regulatory capital framework.”

The enterprise regulatory capital framework establishes leverage and risk-based capital requirements beyond what is expressly required by the GSE Act. The framework provides a granular assessment of credit risk specific to different mortgage loan categories, as well as components for market risk and operational risk. The enterprise regulatory capital framework includes the following requirements relating to the amount and form of capital we must hold:

•Supplemental leverage and risk-based capital requirements based largely on definitions of capital used in U.S. banking regulators’ regulatory capital framework. Under the leverage capital requirements, we must maintain a tier 1 capital ratio of 2.5% of adjusted total assets. Under the risk-based capital requirements, we must maintain


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minimum common equity tier 1 capital, tier 1 capital, and adjusted total capital ratios of 4.5%, 6%, and 8%, respectively, of risk-weighted assets;

•A requirement that we hold prescribed capital buffers that can be drawn down in periods of financial stress and then rebuilt over time as economic conditions improve. If we fall below the prescribed buffer amounts, we must restrict capital distributions such as stock repurchases and dividends, as well as discretionary bonus payments to executives, until the buffer amounts are restored. The prescribed capital buffers represent the amount of capital we are required to hold above the minimum leverage and risk-based capital requirements.

◦The prescribed leverage buffer amount, or PLBA, represents the amount of tier 1 capital we are required to hold above the minimum tier 1 leverage capital requirement;

◦The risk-based capital buffers consist of three separate components: a stability capital buffer, a stress capital buffer, and a countercyclical capital buffer. Taken together, these risk-based buffers comprise the prescribed capital conservation buffer amount, or PCCBA. The PCCBA must be comprised entirely of common equity tier 1 capital;

•Specific minimum percentages, or “floors,” on the risk-weights applicable to single-family and multifamily exposures, which has the effect of increasing the capital required to be held for loans otherwise subject to lower risk weights;

•Specific floors on the risk-weights applicable to retained portions of credit risk transfer transactions, which has the effect of decreasing the capital relief obtained from these transactions; and

•Additional elements based on U.S. banking regulators’ regulatory capital framework, including the planned eventual introduction of an advanced approach to complement the standardized approach for measuring risk-weighted assets.

The dates by which we must comply with the requirements of the enterprise regulatory capital framework are staggered and largely dependent on whether we remain in conservatorship. Our compliance with the capital buffers will be required upon exit from conservatorship, and our compliance with the minimum regulatory capital requirements will be required by the later of our exit from conservatorship or such later date as may be ordered by FHFA. The compliance date for advanced approaches of the rule will be January 1, 2025, or such later date as may be specified by FHFA.

The enterprise regulatory capital framework requires substantially higher levels of capital than the previously applicable statutory minimum capital requirement. To be fully capitalized under the enterprise regulatory capital framework, we must meet all applicable leverage capital requirements and risk-based capital requirements, including applicable buffers, under the standardized approach of the rule. As of December 31, 2022, our risk-based adjusted total capital requirement (including buffers) represented the amount of capital needed to be fully capitalized under the standardized approach to the rule, and we had a $258 billion shortfall of our available capital (deficit) to this requirement. See “MD&A—Liquidity and Capital Management—Capital Management—Capital Requirements” and “Note 12, Regulatory Capital Requirements” for more information about our capital metrics under the enterprise regulatory capital framework as of December 31, 2022.

The enterprise regulatory capital framework also contains a number of requirements relating to capital reporting and capital planning, which are either already effective or will become effective in 2023, including:

•A requirement to submit capital reports to FHFA each quarter;

•A requirement to disclose on a quarterly basis in an appropriate publicly available filing or other document our regulatory capital levels, buffers, adjusted total assets and total risk-weighted assets under the standardized approach of the enterprise regulatory capital framework;

•A requirement to provide specified additional public capital disclosures on a quarterly basis; and

•A requirement to submit annual capital plans to FHFA containing specified information and related requirements to obtain FHFA’s approval or provide notice to FHFA for certain capital actions.

Before the enterprise regulatory capital framework went into effect, we followed the requirements of FHFA’s conservatorship capital framework, which was a risk management framework for evaluating business decisions and performance during conservatorship. We have completed our transition from using the conservatorship capital framework to make business and risk decisions to using the enterprise regulatory capital framework and certain other risk measures to make these decisions. We currently operate at a significant shortfall to the enterprise regulatory capital framework’s requirements. Actions we may take to address this shortfall may have a significant impact on our business. Because the timing of when we will be required to hold capital in compliance with the enterprise regulatory capital framework is uncertain and depends on factors outside our control, the impact of these capital requirements on our business remains uncertain.


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Stress Testing

The Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”) requires certain financial companies to conduct annual stress tests to determine whether the companies have the capital necessary to absorb losses as a result of adverse economic conditions. Under FHFA regulations implementing this requirement, each year we are required to conduct a stress test using two different scenarios of financial conditions provided by FHFA—baseline and severely adverse—and to publish a summary of our stress test results for the severely adverse scenario by August 15. We publish our stress test results on our website. We and FHFA published our most recent stress test results for the severely adverse scenario on August 11, 2022.

Following our publication of our 2022 stress test results, we discovered errors in a model we use to prepare our annual stress test results that affected these results for 2022 and prior years. Once our evaluation of these errors is complete, we will post updated 2022 stress test results for the severely adverse scenario on our website.

Portfolio Standards

The GSE Act requires FHFA to establish standards governing our portfolio holdings, to ensure that they are backed by sufficient capital and consistent with our mission and safe and sound operations. FHFA is also required to monitor our portfolio and, in some circumstances, may require us to dispose of or acquire assets. In 2010, FHFA adopted, as the standard for our portfolio holdings, the portfolio limits specified in the senior preferred stock purchase agreement described under “Conservatorship and Treasury Agreements—Treasury Agreements—Covenants under Treasury Agreements,” as it may be amended from time to time. The rule is effective for as long as we remain subject to the terms and obligations of the senior preferred stock purchase agreement.

FHFA Proposed Liquidity Requirements

In June 2020, FHFA instructed us to meet prescriptive liquidity requirements. In December 2020, those requirements became effective and FHFA issued a proposed rule in line with the updated requirements. Liquidity requirements affect the amount of liquid assets we are required to hold, and to meet FHFA’s instructions and proposed rule, we hold more liquid assets than we were required to hold under our previous framework. For information about our liquidity requirements, see “MD&A—Liquidity and Capital Management—Liquidity Management—Liquidity and Funding Risk Management Practices and Contingency Planning.”

Receivership

Under the GSE Act, the Director of FHFA must place us into receivership if they make a written determination that our assets are less than our obligations (that is, we have a net worth deficit) or if we have not been paying our debts as they become due, in either case, for a period of 60 days. FHFA has notified us that the measurement period for any mandatory receivership determination with respect to our assets and liabilities would commence no earlier than the SEC public filing deadline for our quarterly or annual financial statements and would continue for 60 calendar days thereafter. FHFA has advised us that if, during that 60-day period, we receive funds from Treasury in an amount at least equal to the deficiency amount under the senior preferred stock purchase agreement, the Director of FHFA will not make a mandatory receivership determination.

In addition, we could be put into receivership at the discretion of the Director of FHFA at any time for other reasons set forth in the GSE Act. The statutory grounds for discretionary appointment of a receiver include: a substantial dissipation of assets or earnings due to unsafe or unsound practices; the existence of an unsafe or unsound condition to transact business; an inability to meet our obligations in the ordinary course of business; a weakening of our condition due to unsafe or unsound practices or conditions; critical undercapitalization; undercapitalization and no reasonable prospect of becoming adequately capitalized; the likelihood of losses that will deplete substantially all of our capital; or by consent.

The appointment of FHFA as receiver would immediately terminate the conservatorship. In the event of receivership, the GSE Act requires FHFA, as the receiver, to organize a limited-life regulated entity with respect to Fannie Mae. Among other requirements, the GSE Act provides that this limited-life regulated entity:

•would succeed to Fannie Mae’s charter and thereafter operate in accordance with and subject to such charter;

•would assume, acquire or succeed to our assets and liabilities to the extent that such assets and liabilities are transferred by FHFA to the entity; and

•would not be permitted to assume, acquire or succeed to any of our obligations to shareholders.

Placement into receivership would likely have a material adverse effect on holders of our common stock and preferred stock, and could have a material adverse effect on holders of our debt securities and Fannie Mae MBS. Should we be placed into receivership, different assumptions would be required to determine the carrying value of our assets, which


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would likely lead to substantially different financial results. For more information on the risks to our business relating to receivership and uncertainties regarding the future of our business, see “Risk Factors—GSE and Conservatorship Risk.”

Resolution Planning

In May 2021, FHFA issued a final rule requiring us to develop a plan for submission to FHFA that would assist FHFA in planning for the rapid and orderly resolution of the company if FHFA is appointed as our receiver. The stated goals in the rule for our resolution plan are to:

•minimize disruption in the national housing finance markets by providing for the continued operation of our core business lines in receivership by a newly constituted limited-life regulated entity;

•preserve the value of our franchise and assets;

•facilitate the division of assets and liabilities between the limited-life regulated entity and the receivership estate;

•ensure that investors in our guaranteed mortgage-backed securities and our unsecured debt bear losses in the order of their priority established under the GSE Act, while minimizing unnecessary losses and costs to these investors; and

•foster market discipline by making clear that no extraordinary government support will be available to indemnify investors against losses or fund the resolution of the company.

The rule requires that we submit our initial resolution plan to FHFA by April 6, 2023, and subsequent resolution plans not later than every two years thereafter unless otherwise notified by FHFA. The rule provides that, in developing our resolution plan, we must assume that receivership may occur under severely adverse economic conditions, and we may not assume the provision or continuation of extraordinary support by the U.S. government (including support under our senior preferred stock purchase agreement with Treasury).

Affordable Housing Allocations

The GSE Act requires us to set aside in each fiscal year an amount equal to 4.2 basis points for each dollar of the unpaid principal balance of our new business purchases and to pay this amount to specified HUD and Treasury funds in support of affordable housing. New business purchases consist of single-family and multifamily whole mortgage loans purchased during the period and single-family and multifamily mortgage loans underlying Fannie Mae MBS issued during the period pursuant to lender swaps, which we describe in “Mortgage Securitizations.” We are prohibited from passing through the cost of these allocations to the originators of the mortgage loans that we purchase or securitize. For each year’s new business purchases since 2015, we have set aside amounts for these contributions and transferred the funds when directed by FHFA to do so. See “Certain Relationships and Related Transactions, and Director Independence—Transactions with Related Persons—Treasury Interest in Affordable Housing Allocations” for information on our contribution for 2022 new business purchases.

Fair Lending

The GSE Act requires the Secretary of HUD to assure that Fannie Mae and Freddie Mac meet their fair lending obligations. Among other things, HUD periodically reviews and comments on our underwriting and appraisal guidelines to ensure consistency with the Fair Housing Act. In July 2021, FHFA issued a Policy Statement on Fair Lending describing its statutory authority and policies for supervisory oversight and enforcement of fair lending matters with respect to Fannie Mae and Freddie Mac. In August 2021, FHFA and HUD entered into a memorandum of understanding regarding fair housing and fair lending coordination. Among other things, the memorandum of understanding allows HUD and FHFA to coordinate on investigations, compliance reviews, and ongoing monitoring of Fannie Mae and Freddie Mac to ensure compliance with the Fair Housing Act. In December 2021, FHFA released an advisory bulletin to provide FHFA's supervisory expectations and guidance to Fannie Mae and Freddie Mac on fair lending and fair housing compliance.

FHFA Rule on Credit Score Models

Fannie Mae uses credit scores to establish a minimum credit threshold for mortgage lending, provide a foundation for risk-based pricing, and support disclosures to investors. Under an FHFA rule that became effective in October 2019, we are required to validate and approve third-party credit score models and obtain FHFA’s approval of our determination. We must evaluate the models for factors such as accuracy, reliability and integrity, as well as impacts on fair lending and the mortgage industry. For a discussion of our current credit score model and FHFA’s announcement of its validation and approval of two new credit score models for use by Fannie Mae and Freddie Mac, see “MD&A—Single-Family Business—Single-Family Mortgage Credit Risk Management—Single-Family Acquisition and Servicing Policies and


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Underwriting and Servicing Standards—New Credit Score Models and Expected Change to Credit Report Requirement.”

Interagency Action Plan to Advance Property Appraisal and Valuation Equity

In March 2022, the Interagency Task Force on Property Appraisal and Valuation Equity (the “PAVE Task Force”) published an Action Plan to Advance Property Appraisal and Valuation Equity (the “PAVE Action Plan”). The PAVE Task Force is composed of thirteen federal agencies and offices, including HUD and FHFA. The PAVE Action Plan outlines the historical role of racism in the valuation of residential property, examines the various forms of bias that can appear in residential property valuation practices, describes affirmative steps that federal agencies will take to advance equity in the residential property valuation process, and outlines further recommendations that government and industry stakeholders can initiate. Some of the proposed actions contained in the PAVE Action Plan, including additional initiatives the PAVE Task Force is considering such as expanded use of alternatives to traditional appraisals, could have a significant impact on our current appraisal and valuation policies and procedures. We expect to work closely with FHFA on any potential future changes to these policies and procedures in support of the PAVE Action Plan and any further recommendations of the PAVE Task Force.

Housing Goals

In this and the following sections, we discuss our housing goals and our duty to serve obligations pursuant to the GSE Act, as well as FHFA’s requirement, as our conservator, that a portion of our new multifamily business be focused on affordable and underserved markets.

Our housing goals, which are established by FHFA in accordance with the GSE Act, require that a specified amount of mortgage loans we acquire meet specified standards relating to affordability or location. For single-family goals, our acquisitions are measured against the lower of benchmarks set by FHFA or the level of goal-eligible originations in the primary mortgage market. The single-family benchmarks are expressed as a percentage of the total number of goal-eligible single-family mortgages acquired each year. Multifamily goals for 2022 and prior years were established as a fixed number of units to be financed; however, as described below, our new multifamily goals for 2023 and 2024 are expressed as a percentage of goal-eligible units in multifamily properties financed by mortgages acquired each year.

2021 Housing Goals

In October 2022, FHFA determined that we met all of our 2021 single-family and multifamily housing goals. The tables below display information about our 2021 housing goals and our performance against these goals.


Single-Family Housing Goals
	2021(1)
	FHFA Benchmark		Single-Family Market Level		Result
Low-income (≤80% of area median income) home purchase goal	24	%	26.7	%	28.7	%
Very low-income (≤50% of area median income) home purchase goal	6		6.8		7.4
Low-income areas home purchase goal(2)	18		22.9		24.5
Low-income areas home purchase subgoal(3)	14		19.1		20.3
Low-income refinancing goal	21		26.1		26.2

(1) The FHFA benchmarks and our results are expressed as a percentage of the total number of goal-eligible single-family mortgages acquired during the year. The single-family market level is the percentage of goal-eligible single-family mortgages originated in the primary mortgage market during the year.

(2) These mortgage loans must be secured by a property that is (a) in a low-income census tract, (b) in a high-minority census tract and affordable to moderate-income families (those with incomes less than or equal to 100% of area median income), or (c) in a designated disaster area and affordable to moderate-income families.

(3) These mortgage loans must be secured by a property that is (a) in a low-income census tract or (b) in a high-minority census tract and affordable to moderate-income families.


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Multifamily Housing Goals
	2021(1)
	Goal	Result

Low-income (≤80% of area median income) goal	315,000	384,488
Very low-income (≤50% of area median income) subgoal	60,000	83,459
Small multifamily low-income subgoal(2)	10,000	14,409

(1) FHFA goals and our results are expressed as number of units financed during the year.

(2) Units in small multifamily properties (defined as properties with 5 to 50 units) affordable to low-income families.

2022 to 2024 Housing Goals

In December 2021, FHFA published a final rule establishing new benchmark levels for our single-family housing goals for 2022 through 2024 and new multifamily housing goals for 2022. In December 2022, FHFA published a final rule establishing new multifamily housing goals for 2023 and 2024.

2022 to 2024 Single-Family Housing Goals

FHFA will continue to evaluate our performance against the single-family housing goals using a two-part approach that compares the goal-qualifying share of our single-family mortgage acquisitions against both a benchmark level and a market level. To meet a single-family housing goal or subgoal, the percentage of our single-family mortgage acquisitions that meet each goal or subgoal must equal or exceed either the benchmark level set in advance by FHFA or the market level for that year. The market level is determined retrospectively each year based on actual goal-eligible originations in the primary mortgage market as measured by FHFA based on Home Mortgage Disclosure Act data for that year.

The December 2021 final rule established two new single-family home purchase subgoals to replace the prior low-income areas home purchase subgoal: a new minority census tracts subgoal and a new low-income census tracts subgoal, which are described in the table below. The December 2021 final rule also increased the benchmark levels for the remaining single-family housing goals.




						FHFA Benchmark Level
Single-Family Goals						2022-2024
Low-income home purchase goal(1)						28%
Very low-income home purchase goal(2)						7%
Low-income areas home purchase goal(3)						20% (2022)
Minority census tracts subgoal (new)(4)						10%
Low-income census tracts subgoal (new)(5)						4%
Low-income refinancing goal(6)						26%

(1) Home purchase mortgages on single-family, owner-occupied properties to borrowers with incomes no greater than 80% of area median income.

(2) Home purchase mortgages on single-family, owner-occupied properties to borrowers with incomes no greater than 50% of area median income.

(3) Home purchase mortgages on single-family, owner-occupied properties with borrowers in census tracts with median income no greater than 80% of area median income; borrowers with incomes no greater than 100% of area median income in minority census tracts; and borrowers in designated disaster areas. Minority census tracts are those that have a minority population of at least 30% and a median income of less than 100% of area median income. For 2018 to 2021, FHFA set the low-income areas home purchase goal benchmark level on an annual basis by adding a disaster area increment to the low-income areas subgoal benchmark level. For 2022 to 2024, FHFA sets the low-income areas home purchase goal benchmark level on an annual basis by adding a disaster area increment to the sum of the benchmark levels for the minority census tracts subgoal and the low-income census tracts subgoal.

(4) Home purchase mortgages on single-family, owner-occupied properties to borrowers with incomes no greater than 100% of area median income in minority census tracts.

(5) (i) Home purchase mortgages on single-family, owner-occupied properties to borrowers (regardless of income) in low-income census tracts that are not minority census tracts, and (ii) home purchase mortgages on single-family, owner-occupied properties to borrowers with incomes greater than 100% of area median income in low-income census tracts that are also minority census tracts. Low income census tracts are those where the median income is no greater than 80% of area median income.

(6) Refinancing mortgages on single-family, owner-occupied properties to borrowers with incomes no greater than 80% of area median income.

We believe we met all of our 2022 single-family housing goal benchmarks other than the low-income home purchase benchmark and the very low-income home purchase benchmark. As noted above, we are in compliance with the single-


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family housing goals if we meet either the benchmarks or market share measures, so we may still meet our goals. FHFA will make a final determination regarding our 2022 single-family housing goals performance later in the year, after the release of data reported under the Home Mortgage Disclosure Act.

If we do not meet our housing goals, FHFA determines whether the goals were feasible. If FHFA finds that our goals were feasible, we may become subject to a housing plan that could require us to take additional steps that could have an adverse effect on our results of operations and financial condition. The housing plan must describe the actions we would take to meet the goal in the next calendar year and be approved by FHFA. The potential penalties for failure to comply with housing plan requirements include a cease-and-desist order and civil money penalties.

2022 Multifamily Housing Goals

In response to comments on its rule proposal, FHFA’s final rule published in December 2021 established multifamily housing goals for 2022 only, rather than for 2022 through 2024. The December 2021 final rule increased each of the multifamily housing goals. FHFA will evaluate our performance for 2022 against the following multifamily goals.




						Goal
Multifamily Goals						2022
Low-income goal(1)						415,000
Very low-income subgoal(2)						88,000
Small multifamily low-income subgoal(3)						17,000

(1) Affordable to low-income families, defined as families with incomes no greater than 80% of area median income.

(2) Affordable to very low-income families, defined as families with incomes no greater than 50% of area median income.

(3) Units in small multifamily properties (defined as properties with 5 to 50 units) affordable to low-income families.

We believe we met all of our 2022 multifamily housing goals, and FHFA will make a final determination regarding this performance later in the year.

2023 and 2024 Multifamily Housing Goals

In December 2022, FHFA published a final rule on our multifamily housing goals for 2023 and 2024. Rather than measuring the multifamily housing goals based on a fixed number of units, our 2023 and 2024 multifamily housing goals are based on the percentage share of the goal-qualifying units in our annual multifamily loan acquisitions that are affordable to each income category. The rule did not change the underlying criteria that determine which multifamily units qualify for credit under the housing goals.

The table below sets forth our multifamily housing goals for 2023 and 2024.


	Goal
Multifamily Goals	2023 and 2024
	(Percentage share of goal-eligible units)
Low-income goal(1)	61	%
Very low-income subgoal2)	12
Small multifamily low-income subgoal(3)	2.5

(1) Affordable to low-income families, defined as families with incomes less than or equal to 80% of area median income.

(2) Affordable to very low-income families, defined as families with incomes less than or equal to 50% of area median income.

(3) Units in small multifamily properties (defined as properties with 5 to 50 units) affordable to low-income families.

The final rule noted that FHFA may adjust these 2023 and 2024 multifamily housing goals following publication in light of market conditions or for other reasons.

As described in “Risk Factors—GSE and Conservatorship Risk,” actions we may take to meet our housing goals and duty to serve requirements described below may materially increase our provision for credit losses and our write-offs.

Multifamily Business Volume Cap

As our conservator, FHFA has established caps on our new multifamily business volume and requirements that a portion of our multifamily volume be focused on affordable and underserved markets. Our multifamily loan purchase cap for 2023 is $75 billion, a reduction from the $78 billion cap applicable for 2022. Consistent with the 2022 cap, a minimum of 50% of our 2023 multifamily loan purchases must be mission-driven, focused on specified affordable and underserved market segments; however, FHFA has revised the multifamily requirements for mission-driven, affordable housing for 2023, including by:


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•Removing the requirement that 25% of multifamily loan purchases must be affordable to residents earning 60% or less of area median income to reduce inconsistencies with FHFA’s housing goals; and

•Within the mission-driven eligibility criteria, creating a new category focused on preserving affordability in workforce housing to encourage financing of loans on properties with rent or income restrictions affordable at levels that meet market needs.

See “MD&A—Multifamily Business—Multifamily Business Metrics” for more information about our multifamily business volume cap, which is a requirement under the scorecard FHFA issued establishing 2023 corporate performance objectives for us. More information on FHFA’s 2023 scorecard is provided in our current report on Form 8-K filed on January 10, 2023.

Duty to Serve Underserved Markets

The GSE Act requires that we serve very low-, low-, and moderate-income families in three specified underserved markets: manufactured housing, affordable housing preservation and rural housing. Under FHFA’s implementing “duty to serve” rule, we are required to adopt an underserved markets plan for each underserved market covering a three-year period that sets forth the activities and objectives we will undertake to meet our duty to serve that market.

The types of activities that are eligible for duty to serve credit in each underserved market are summarized below:

•Manufactured housing market. For the manufactured housing market, duty to serve credit is available for eligible activities relating to manufactured homes (whether titled as real property or personal property (known as chattel)) and loans for specified categories of manufactured housing communities.

•Affordable housing preservation market. For the affordable housing preservation market, duty to serve credit is available for eligible activities relating to preserving the affordability of housing for renters and buyers under specified programs enumerated in the GSE Act and other comparable affordable housing programs administered by state and local governments, subject to FHFA approval. Duty to serve credit also is available for activities related to small multifamily rental properties, energy efficiency improvements on existing multifamily rental and single-family first lien properties, certain shared equity homeownership programs, the purchase or rehabilitation of certain distressed properties, and activities under HUD’s Choice Neighborhoods Initiative and Rental Assistance Demonstration programs.

•Rural housing market. For the rural housing market, duty to serve credit is available for eligible activities related to housing in rural areas, including activities related to housing in high-needs rural regions and for high-needs rural populations.

FHFA reviews our draft underserved markets plans. In response to comments we received from FHFA on our initially proposed plans for 2022 to 2024, we revised our draft plans for further FHFA consideration. FHFA issued a non-objection to the revised draft plans in April 2022.

FHFA has also established an annual process for evaluating our achievements under the plans, with performance results to be reported to Congress annually. If FHFA determines that we failed to meet the requirements of an underserved markets plan, FHFA may require us to submit a housing plan for FHFA approval that could require us to take additional steps. In October 2022, FHFA reported its determination that we complied with our 2021 duty to serve requirements. We believe we also met our 2022 duty to serve obligations. FHFA will determine our performance with respect to our 2022 duty to serve obligations in 2023.

Guaranty Fees and Pricing

Our guaranty fees and pricing are subject to regulatory, legislative and conservatorship requirements, including FHFA guidance and instruction. These requirements include the following:

•Upfront Fees. We use loan-level price adjustments, including various upfront risk-based fees, to price for the credit risk we assume in providing our guaranty on the single-family loans we acquire. FHFA, as conservator, must approve changes to the national loan-level price adjustments (or upfront fees) that we charge for the risk we assume in providing our guaranty and can direct us to make other changes to our guaranty fee pricing for new single-family acquisitions.

•Base Fees. We have the ability to change our base single-family contractual guaranty fee pricing, subject to minimum base guaranty fees set by FHFA in its regulatory capacity. These minimum base guaranty fees generally apply to our acquisitions of 30-year and 15-year single-family fixed-rate loans in lender swap transactions.


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•Return Targets. For new single-family and multifamily acquisitions, FHFA has instructed us to meet a minimum return on equity target based on our capital requirements. FHFA also has instructed us to establish a long-term target for returns at the enterprise level, which may impact our guaranty fees.

•TCCA Fees. In December 2011, Congress enacted the Temporary Payroll Tax Cut Continuation Act of 2011 (the “TCCA”) which, among other provisions, required that we increase our single-family guaranty fees by at least 10 basis points and remit this increase to Treasury. To meet our obligations under the TCCA and at the direction of FHFA, we increased the guaranty fee on all single-family residential mortgages delivered to us by 10 basis points effective April 1, 2012. The resulting revenue is included in net interest income and the expense is recognized as “TCCA fees.” In November 2021, the Infrastructure Investment and Jobs Act was enacted, which extended to October 1, 2032 our obligation under the TCCA to collect 10 basis points in guaranty fees on single-family residential mortgages delivered to us and pay the associated revenue to Treasury. In January 2022, FHFA advised us to continue to pay these TCCA fees to Treasury with respect to all single-family loans acquired by us before October 1, 2032, and to continue to remit these amounts to Treasury on and after October 1, 2032 with respect to loans we acquired before this date until those loans are paid off or otherwise liquidated. As noted in “Glossary of Terms Used in This Report,” in this report we use the term “TCCA fees” to refer to the expense recognized as a result of the 10 basis point increase in guaranty fees on all single-family residential mortgages delivered to us on or after April 1, 2012 pursuant to the Temporary Payroll Tax Cut Continuation Act of 2011 and as extended by the Infrastructure Investment and Jobs Act, which we remit to Treasury on a quarterly basis.

•UMBS. Our ability to change our single-family guaranty fee pricing is limited by the FHFA rule described in “FHFA Rule on Uniform Mortgage-Backed Securities” below, as our single-family guaranty fees is one of the covered items.

See “MD&A—Single-Family Business—Single-Family Business Metrics—Recent and Future Price Changes” for a discussion of changes to our single-family guaranty fee pricing announced in 2022 and 2023. Also see “MD&A—Consolidated Results of Operations—TCCA Fees” and “Certain Relationships and Related Transactions, and Director Independence—Transactions with Related Persons—Transactions with Treasury—Obligation to Pay TCCA Fees to Treasury” for additional discussion of our TCCA fees.

New Products and Activities

The GSE Act requires us to provide advance notice to FHFA before undertaking a new activity and to obtain prior approval from FHFA before offering a new product to the market, subject to certain exclusions. In December 2022, FHFA adopted a final rule implementing these provisions. The final rule will be effective February 27, 2023, and will replace an interim final rule that has been in place since July 2009.

The final rule establishes a process for the review of new activities and products by FHFA, including providing for a 30-day public notice and comment period with respect to new products. The final rule also establishes criteria for determining what constitutes a new activity that requires advance notice to FHFA and what is excluded from being considered a new activity, such as enhancements or modifications to DU or to the mortgage terms and conditions or underwriting criteria relating to the mortgages we purchase or guarantee. The final rule describes a new product as any new activity that FHFA determines merits public notice and comment about whether it is in the public interest. FHFA may approve a new product proposed by us if FHFA determines that the new product is authorized under our charter, in the public interest and consistent with safety and soundness. The final rule provides that FHFA has the authority to place conditions or limitations on a new activity or a new product.

Executive Compensation

The amount and type of compensation we may pay our executives is subject to a number of legal and regulatory restrictions, particularly while we are in conservatorship. For a description of our executive compensation program and legal, regulatory and conservator requirements that affect our executive compensation, see “Executive Compensation.”

FHFA Rule on Uniform Mortgage-Backed Securities

We and Freddie Mac are required to align our programs, policies and practices that affect the prepayment rates of TBA-eligible MBS pursuant to an FHFA rule. The rule is intended to ensure that Fannie Mae and Freddie Mac programs, policies and practices that individually have a material effect on cash flows (including policies that affect prepayment speeds) are and will remain aligned regardless of whether we and Freddie Mac are in conservatorship. The rule provides a non-exhaustive list of covered programs, policies and practices, including management decisions or actions about: single-family guaranty fees; the spread between the note rate on the mortgage and the pass-through coupon on the MBS; eligibility standards for sellers, servicers, and private mortgage insurers; distressed loan servicing requirements; removal of mortgage loans from securities; servicer compensation; and proposals that could materially


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change the credit risk profile of the single-family mortgages securitized by a GSE. We believe that our policies and practices are generally aligned with the requirements specified by FHFA pursuant to the rule. However, FHFA may mandate additional alignment efforts in the future, and the impact of any such efforts on our business or our MBS is uncertain. See “Mortgage Securitizations—Uniform Mortgage-Backed Securities, or UMBS—UMBS and Structured Securities” for a discussion of a new upfront fee for commingled securities that we announced in January 2023 and a statement issued by the Director of FHFA relating to this fee and FHFA’s review of the enterprise regulatory capital framework.

Industry and General Matters

COVID-19 Response

In response to the COVID-19 pandemic, a number of legislative and executive actions were taken by the federal government and state and local governments to assist affected borrowers and renters and to slow the spread of the pandemic, including actions that applied to the loans we guarantee. While most of these actions are no longer in effect, the COVID-19 national emergency remains in place. In January 2023, the Administration announced it intends to extend the COVID-19 national emergency to May 11, 2023, and end the emergency on that date. We continue to offer forbearance relief and other home retention solutions to borrowers affected by the COVID-19 pandemic, as described in “MD&A—Single-Family Business—Single-Family Problem Loan Management.”

Risk Retention

Under a rule implementing the Dodd-Frank Act’s credit risk retention requirement, sponsors of securitization transactions are generally required to retain a 5% economic interest in the credit risk of the securitized assets. The rule offers several compliance options, one of which is to have either Fannie Mae or Freddie Mac (so long as they remain in conservatorship or receivership with capital support from the United States) securitize and fully guarantee the assets, in which case no further retention of credit risk is required. A potential exit from conservatorship, or changes we make in our business upon any potential exit from conservatorship to comply with the rule, could reduce our market share or adversely impact our business. Securities backed solely by mortgage loans meeting the definition of a “qualified residential mortgage” are exempt from the risk retention requirements of the rule. The rule currently defines “qualified residential mortgage” to have the same meaning as the term “qualified mortgage” as defined by the CFPB in connection with its ability-to-repay rule discussed below.

Ability-to-Repay Rule and the Qualified Mortgage Patch

The Dodd-Frank Act amended the Truth in Lending Act to require creditors to determine that borrowers have a “reasonable ability to repay” most mortgage loans prior to making such loans. In 2013, the CFPB issued a rule that, among other things, requires creditors to determine a borrower’s “ability to repay” a mortgage loan. If a creditor fails to comply, a borrower may be able to offset a portion of the amount owed in a foreclosure proceeding or recoup monetary damages. The rule offers several options for complying with the ability-to-repay requirement, including making loans that meet certain terms and characteristics (referred to as “qualified mortgages”), which may provide creditors and their assignees with special protection from liability. A loan will be a standard qualified mortgage under the rule if, among other things, (1) the points and fees paid in connection with the loan do not exceed 3% of the total loan amount, (2) the loan term does not exceed 30 years, (3) the loan is fully amortizing with no negative amortization, interest-only or balloon features and (4) the debt-to-income (“DTI”) ratio on the loan does not exceed 43% at origination and is underwritten according to Appendix Q in the rule. The CFPB also created the qualified mortgage “patch,” pursuant to which a special class of conventional mortgage loans are considered qualified mortgages if they (1) meet the points and fees, term and amortization requirements of qualified mortgages generally and (2) are eligible for sale to Fannie Mae or Freddie Mac. In 2013, FHFA directed Fannie Mae and Freddie Mac to limit our acquisition of single-family loans to those loans that meet the points and fees, term and amortization requirements for qualified mortgages, or to loans that are exempt from the ability-to-repay rule, such as loans made to investors.

In December 2020, the CFPB published a rule amendment that eliminated the qualified mortgage patch and replaced the 43% DTI ratio limit and certain other requirements for a standard qualified mortgage with a pricing and underwriting framework. The final qualified mortgage rule went into effect in March 2021, with lenders initially required to comply beginning in July 2021. In April 2021, the CFPB published a final rule extending the mandatory compliance date to October 2022 and thereby also extending the qualified mortgage patch. The qualified mortgage patch was allowed to expire on October 1, 2022. We do not expect the final qualified mortgage rule to impact our business significantly. See “Risk Factors—GSE and Conservatorship Risk” and “Risk Factors—Legal and Regulatory Risk” for more information on risks presented by regulatory changes in the financial services industry.


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Single-Counterparty Credit Limit

The Board of Governors of the Federal Reserve System (the “Federal Reserve Board”) has adopted rules to restrict the counterparty credit exposures of U.S.-based global systemically important banks (“U.S. G-SIBs”) and certain large bank holding companies, large savings and loan holding companies, and U.S. intermediate holding companies that are subsidiaries of foreign banking organizations. These rules generally limit the exposure of a covered organization to any counterparty and its affiliates to no more than 25% of the covered organization’s tier 1 capital. U.S. G-SIBs must adhere to a stricter limit of 15% of their tier 1 capital for exposures to any other U.S. G-SIB or non-bank entity supervised by the Federal Reserve.

While Fannie Mae is in conservatorship, a covered organization’s exposures involving claims on or directly and fully guaranteed by Fannie Mae are exempt from these restrictions and Fannie Mae MBS and debt can be used as collateral to reduce a banking organization’s counterparty exposure. We do not know what impact, if any, these rules may have on our lenders’ or counterparties’ business practices, or whether and to what extent this rule may adversely affect demand for or the liquidity of securities we issue. The Federal Reserve Board has indicated that a change in the conservatorship status of the GSEs could affect aspects of the Federal Reserve Board’s regulatory framework, and that it “will continue to monitor and take into consideration any future changes to the conservatorship status of the GSEs, including the extent and type of support received by the GSEs.”

Transition from LIBOR and Alternative Reference Rates

In 2017, the United Kingdom’s Financial Conduct Authority (“FCA”), which regulates the London Inter-bank Offered Rate (“LIBOR”), announced its intention to stop persuading or compelling the group of major banks that sustains LIBOR to submit rate quotations. ICE Benchmark Administration (“IBA”), the administrator of LIBOR, ceased publication of one-week and two-month U.S. dollar LIBOR after December 2021. In November 2022, the FCA issued a consultation paper stating that overnight, one-month, three-month, six-month and twelve-month LIBOR will continue to be published in their representative, bank panel quotation-based form until June 30, 2023. In the same consultation paper, the FCA proposed to require publication of the one-month, three-month and six-month LIBOR on a non-representative, synthetic basis (that is, calculated based on the use of a term rate using the Secured Overnight Financing Rate) until the end of September 2024.

We are exposed to LIBOR-based financial instruments, primarily relating to our acquisitions of loans and securities, sales of securities, and derivative transactions, that have been entered into previously and mature after June 2023. However, we no longer acquire LIBOR loans or securities, issue LIBOR securities or enter into LIBOR derivatives transactions that increase our LIBOR risk exposure, so our exposure to LIBOR continues to diminish.

We have been actively seeking to facilitate an orderly transition from LIBOR to emerging alternative rates. We established an internal office focused on LIBOR transition issues that is overseen by our LIBOR Enterprise Steering Council, which includes members of senior management. We also coordinate with FHFA on our LIBOR transition efforts. In addition to the work we are doing on an enterprise level to facilitate an orderly transition from LIBOR, we also are a voting member of the Alternative Reference Rates Committee (the “ARRC”) and participate in its working groups. The ARRC is a group of private-market participants convened by the Federal Reserve Board and the Federal Reserve Bank of New York to identify a set of alternative U.S. dollar reference interest rates and an adoption plan for those alternative rates. Banking and financial regulators, including FHFA, also participate in the ARRC as ex-officio members. In 2017, the ARRC recommended an alternative reference rate, referred to as the Secured Overnight Financing Rate (“SOFR”). The Federal Reserve Bank of New York began publishing SOFR in 2018.

In support of the ARRC’s efforts to develop SOFR as a key market index, we issued the market’s first SOFR securities in 2018. We also have taken numerous steps to transition our financial instruments away from LIBOR; including using SOFR-indexed adjustable-rate mortgage products for new originations for our single-family business and our multifamily business, ceasing our purchase of any LIBOR adjustable-rate mortgage loans, issuing SOFR-indexed REMIC securities, and ceasing the issuance of new LIBOR REMIC securities. We supported the initial development of SOFR-indexed interest rate swaps and futures transactions and continue to execute these SOFR trades on a frequent basis. We have not issued LIBOR debt securities since 2017, and we no longer enter into new LIBOR derivatives trades that increase our LIBOR risk exposure.

Our LIBOR-indexed derivative contracts historically represented the largest category (measured by notional amount) of our LIBOR exposure. During 2021, we terminated the vast majority of our LIBOR derivatives transactions (and, where appropriate, entered into new SOFR derivatives trades). While we have a small amount of remaining legacy LIBOR derivatives trades that will mature after June 2023, the related contracts provide that LIBOR will be replaced with SOFR once LIBOR ceases to be published.

Given that our derivatives LIBOR exposure has been significantly decreased and the transition to SOFR has been addressed, our three principal sources of continued exposure to LIBOR arise from (1) single-family and multifamily


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LIBOR-based adjustable-rate mortgage loans that we have securitized or own; (2) LIBOR-indexed REMIC structured securities that we have issued; and (3) LIBOR-indexed credit risk transfer securities. Each of those products allow us to select a replacement index if LIBOR ceases to be published or, for products issued in 2020 or after, uses fallback language based predominantly on the recommendations of the ARRC.

In December 2022, the Federal Reserve Board published Regulation ZZ, a final regulation that provides default rules for certain contracts that use LIBOR as the benchmark reference interest rate index. Regulation ZZ implements the “Adjustable Interest Rate (LIBOR) Act” (the “LIBOR Act”), which was enacted in March 2022 and establishes a clear and uniform process for replacing LIBOR as the benchmark reference interest rate index in existing contracts that do not contain a clearly defined or practicable replacement benchmark for when LIBOR is discontinued. Under Regulation ZZ, references to the most common tenors of LIBOR in these contracts will be replaced as a matter of law, without the need to be amended, to instead reference the benchmark interest rate indices identified by the Federal Reserve Board in the regulation.

The replacement benchmark interest rate indices identified by the Federal Reserve Board in Regulation ZZ are based on SOFR and include appropriate “tenor spread adjustments” to reflect historical spreads between LIBOR and SOFR. In December 2022, FHFA, as our conservator, directed us to adopt the Federal Reserve-selected benchmark replacement indices, including applicable tenor spread adjustments, in the case of all legacy contracts and financial instruments in which we will exercise discretion in selecting a LIBOR replacement index. On December 22, 2022, we announced the following replacement indices for the legacy LIBOR loans and securities for which we are responsible for selecting the replacement index, which are the benchmark replacements provided in Regulation ZZ and are based on SOFR:

•Single-family adjustable-rate mortgages (“ARMs”) and related MBS: Relevant tenor of term SOFR published by CME Group Benchmark Administration, Ltd. plus the applicable tenor spread adjustment specified in Regulation ZZ; and

•Multifamily ARMs and related MBS, credit risk transfer securities, and collateralized mortgage obligations: 30-day average SOFR plus the applicable tenor spread adjustment specified in Regulation ZZ.

Our transition to these replacement indices will occur the day after June 30, 2023, the last date on which all remaining tenors of USD LIBOR will be published.

The LIBOR Act and Regulation ZZ establish a safe harbor for market participants that act in accordance with such legislation and regulation, shielding them from litigation for selecting and implementing the Federal Reserve-selected replacement indices and related conforming changes. As a result, the LIBOR Act and Regulation ZZ reduce the risks to us associated with the approaching cessation of LIBOR. See “Risk Factors—Market and Industry Risk” for a discussion of the risks to our results of operations, financial condition, liquidity and net worth posed by the discontinuance of LIBOR.

SEC Proposed Rule Prohibiting Conflicts of Interest in Certain Securitizations

In January 2023, the SEC issued a proposed rule prohibiting conflicts of interest in certain securitization transactions. The proposed rule would restrict securitization participants from engaging in certain transactions with respect to an asset-backed security for a period ending one year after the initial sale of that security and also specifies certain prohibited transaction types. The proposed rule provides an exception for our asset-backed securities so long as those securities are fully guaranteed by us and we are operating under the conservatorship of FHFA with capital support from the United States.

As a result, if adopted as proposed, the rule could affect or prohibit our ability to enter into credit risk transfer transactions following our exit from conservatorship. Further, while the SEC indicated in the proposing release its intent to exempt us from the rule while we are in conservatorship, questions remain regarding the proposed rule and we are still assessing the potential impact of the rule on our credit risk transfer transactions during conservatorship. In addition, there can be no assurance that the final rule will not reflect important modifications, including with respect to the exception for our asset-backed securities prior to our exit from conservatorship.

Human Capital

Overview

Our employees are key to ensuring our long-term success and meeting our strategic objectives. We had approximately 8,000 employees as of December 31, 2022, our final pay-period end date in 2022. Because we design, build and maintain complex systems to support our specialized role in the secondary mortgage market, 41% of our employees work in technology-related jobs. A tight labor market and remote work opportunities increased the competition we faced from other companies in hiring new employees, as well as in retaining our employees. Competition was especially high


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for employees with technology skills. While voluntary attrition steadily declined to a near pre-pandemic level throughout 2022, we remain focused on attracting, engaging, retaining and developing a highly skilled workforce in this competitive market. During 2022, an average of 8% of total positions in the company and 10% of our technology-related positions were vacant. Our vacancy rate at any given point in time can be affected by factors such as hiring priorities, labor market conditions, and headcount growth rates. We discuss how restrictions on our compensation and uncertainty with respect to our future can affect our ability to retain and recruit employees in “Risk Factors—GSE and Conservatorship Risk.” Despite conservatorship, an uncertain future, and limitations on the compensation we are able to offer, we believe many employees and potential recruits are attracted by our mission and the compelling nature of our work.

See “Directors, Executive Officers and Corporate Governance—Corporate Governance—Human Capital Management Oversight” for information on oversight of human capital management by our Board of Directors’ Compensation and Human Capital Committee.

Employee Engagement

We are committed to maintaining an engaged workforce as we believe engagement is critical to the ongoing achievement of the company’s and the conservator’s goals. We monitor employee engagement through regular surveys. In 2022, the vast majority of our employees agreed with statements such as that they would recommend Fannie Mae as a great place to work, which we consider to be strong indicators of their engagement. We believe our ability to recruit and retain employees and keep them engaged is influenced by the opportunity to do interesting work that supports our mission. We also offer employee benefits to encourage involvement in socially positive efforts, including those that echo our mission. Specifically, we offer employees up to $5,000 per year in matching charitable gifts (subject to overall available funding) and 10 hours of paid leave each month to engage in volunteer activities. We have also established a relief fund to which our employees can make charitable donations to assist employees who have suffered losses as a result of a natural disaster or other catastrophic event. In January 2023, we introduced new benefits to support our employees’ mental, physical and financial well-being, including expanded paid parental, caretaker and vacation leave and a new leave for employees experiencing a home catastrophe.

Employee Development

We invest in our employees’ development to support the success of the company as well as our employees. We seek to provide training and opportunities that enable employees to develop digital, leadership and other critical skills we need to achieve our strategic objectives and fulfill our mission. Through Fannie Mae University, our platform for employee development, our employees can build knowledge and skills with the help of online courses, videos and other resources. We have worked on instilling lean management techniques, practices and behaviors throughout our workforce and Agile development principles for employees engaged in product development. We also emphasize to our employees their responsibility for and role in managing risk through our risk-assessment and monitoring activities, training and corporate messaging.

Safety and Resiliency

In 2022, we continued to prioritize the safety and resiliency of our workforce. Recognizing that our employees are balancing a number of competing obligations, we seek to provide an environment that supports our business needs while helping employees better meet their personal obligations. We embrace hybrid ways of working and operate in a hybrid work model, with office space where teams can come together and flexibility regarding when employees will be in the office. A significant majority of our employees are primarily working remotely and we currently expect they will continue to work primarily remotely for the foreseeable future. To date, our business resiliency plans and technology systems have effectively supported this remote work arrangement. To support our employees in their remote work environment, we have offered office supply stipends. We have also taken a number of steps to support employee resiliency, including extending our practice of half-day flexible Fridays through 2023.

Diversity and Inclusion

We seek to foster an environment in which all employees are treated with dignity and respect, have the opportunity to contribute to meaningful work and grow their careers in an inclusive environment free from discrimination, harassment, and retaliation. We believe this commitment helps us attract and retain a skilled, diverse workforce at all levels of our organization. As of December 31, 2022, racial or ethnic minorities constituted 58% of our overall workforce and 28% of our officer-level employees, and women constituted 44% of our overall workforce and 39% of our officer-level employees.

In 2022, to ensure a strong leadership focus on diversity and inclusion, we appointed a Chief Diversity & Inclusion Officer to the management committee reporting to our President. The Chief Diversity & Inclusion Officer leads our Office of Minority and Women Inclusion, which is responsible for driving the development of our diversity and inclusion


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strategic plan in partnership with leaders across the company, and reporting on our progress against the plan. We also sponsor programs and activities to cultivate a diverse and inclusive work environment by focusing on inclusive leadership principles, talent development, enterprise accessibility, team and group dynamics, and a consistent communications strategy that reinforces the practice of driving inclusion to achieve innovative solutions. We supported ten voluntary, grassroots employee resource groups in 2022 that are open to all employees, support diversity and inclusion, and provide a forum for members to come together for professional growth and development, cultural awareness, education, community service, and networking across the organization. Our officer-led Diversity Advisory Council supports the integration of our diversity and inclusion strategy throughout the company.

Our commitment to diversity extends to our Board of Directors. Over half of Fannie Mae’s Board members are women and/or racial or ethnic minorities. See “Directors, Executive Officers and Corporate Governance—Corporate Governance—Composition of Board of Directors” for additional information on the diversity of our Board of Directors.

Where You Can Find Additional Information

We make available free of charge through our website our annual reports on Form 10-K, quarterly reports on Form 10‑Q, current reports on Form 8-K and all other SEC reports and amendments to those reports as soon as reasonably practicable after we electronically file the material with, or furnish it to, the SEC. Our website address is www.fanniemae.com. Materials that we file with the SEC are also available from the SEC’s website, www.sec.gov. You may also request copies of any filing from us, at no cost, by calling the Fannie Mae Investor Relations & Marketing Helpline at 1-800-2FANNIE (1-800-232-6643).

References in this report to our website or to the SEC’s website do not incorporate information appearing on those websites unless we explicitly state that we are incorporating the information.

Forward-Looking Statements

This report includes statements that constitute forward-looking statements within the meaning of Section 21E of the Exchange Act. In addition, we and our senior management may from time to time make forward-looking statements in our other filings with the SEC, our other publicly available written statements and orally to analysts, investors, the news media and others. Forward-looking statements often include words such as “expect,” “anticipate,” “intend,” “plan,” “believe,” “seek,” “estimate,” “forecast,” “project,” “would,” “should,” “could,” “likely,” “may,” “will” or similar words. Examples of forward-looking statements in this report include, among others, statements relating to our expectations regarding the following matters:

•our future financial performance and the factors that will affect such performance;

•our future aggregate liquidation preference and net worth;

•economic, mortgage market and housing market conditions (including expectations regarding economic recession, home price declines, unemployment rates, refinance volumes and interest rates), the factors that will affect those conditions, and the impact of those conditions on our business and financial results;

•our business plans and strategies, and their impact;

•climate change and its impact;

•the impact of changes in our guaranty fee pricing;

•the impact of future changes to our credit score model requirements and our credit report requirements;

•the effects of our credit risk transfer transactions, as well as the factors that will affect our engagement in future credit risk transfer transactions;

•volatility in our financial results and the impact of hedge accounting on such volatility;

•the size and composition of our retained mortgage portfolio, and the factors that will affect them;

•the impact of the adoption of new accounting guidance;

•the impact of the transition from LIBOR to SOFR on our measurement of interest-rate risk and financial results;

•the impact of legislation and regulation on our business or financial results;

•our payments to HUD and Treasury funds under the GSE Act;

•the risks to our business;


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•the future credit performance of the loans in our guaranty book of business (including future loan delinquencies and foreclosures) and the factors that will affect such performance;

•our expectations relating to cyber attacks and other information security threats;

•the factors that will affect the competition we face;

•how we intend to meet our debt obligations and the factors that will affect our access to debt funding; and

•our expectations relating to legal and regulatory actions and proceedings.

Forward-looking statements reflect our management’s current expectations, forecasts or predictions of future conditions, events or results based on various assumptions and management’s estimates of trends and economic conditions in the markets in which we are active and that otherwise impact our business plans. Forward-looking statements are not guarantees of future performance. By their nature, forward-looking statements are subject to significant risks and uncertainties and changes in circumstances. Our actual results and financial condition may differ, possibly materially, from the anticipated results and financial condition indicated in these forward-looking statements.

There are a number of factors that could cause actual conditions, events or results to differ materially from those described in our forward-looking statements, including, among others, the following:

•uncertainty regarding our future, our exit from conservatorship and our ability to raise or earn the capital needed to meet our capital requirements;

•significant challenges we face in retaining and hiring qualified executives and other employees;

•the prevalence and severity of future COVID-19 outbreaks; the actions taken to contain the virus, or treat its impact, including government actions to mitigate the economic impact of the pandemic; borrower and renter behavior in response to the pandemic and its economic impact; the short-term and long-term impact of COVID-19 infections on the U.S. workforce; and future economic and operating conditions, including the economic impact of outbreaks or increases in the number or severity of COVID-19 cases;

•the impact of the senior preferred stock purchase agreement and the enterprise regulatory capital framework, as well as future legislative and regulatory requirements or changes, governmental initiatives, or executive orders affecting us, such as the enactment of housing finance reform legislation, including changes that limit our business activities or our footprint or impose new mandates on us;

•actions by FHFA, Treasury, HUD, the CFPB, the SEC or other regulators, Congress, the Executive Branch, or state or local governments that affect our business;

•a default by the United States government on its obligations;

•changes in the structure and regulation of the financial services industry;

•the potential impact of a change in the corporate income tax rate, which we expect would affect our net income in the quarter of enactment as a result of a change in our measurement of our deferred tax assets and our net income in subsequent quarters as a result of the change in our effective federal income tax rate;

•the timing and level of, as well as regional variation in, home price changes;

•future interest rates and credit spreads;

•developments that may be difficult to predict, including: market conditions that result in changes in our amortization income from our guaranty book of business or changes in net interest income from our portfolios, fluctuations in the estimated fair value of our derivatives and other financial instruments that we mark to market through our earnings; and developments that affect our loss reserves, such as changes in interest rates, home prices or accounting standards, or events such as natural or other disasters, the emergence of widespread health emergencies or pandemics, or other disruptive or catastrophic events;

•uncertainties relating to the discontinuance of LIBOR, or other market changes that could impact the loans we own or guarantee or our MBS;

•disruptions or instability in the housing and credit markets;

•the size and our share of the U.S. mortgage market and the factors that affect them, including population growth and household formation;

•growth, deterioration and the overall health and stability of the U.S. economy, including U.S. gross domestic product (“GDP”), unemployment rates, personal income, inflation and other indicators thereof;

•changes in fiscal or monetary policy of the U.S. or other countries, and the impact of such changes on domestic and international financial markets;


Fannie Mae 2022 Form 10-K