UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of The Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): October 31, 2023
Federal National Mortgage Association
(Exact name of registrant as specified in its charter)
Fannie Mae
| Federally chartered corporation | ||||||||||||||||||||||||||||||||
| (State or other jurisdiction of incorporation) | (Commission File Number) | (IRS Employer Identification No.) | (Address of principal executive offices, including zip code) | (Registrant’s telephone number, including area code) | ||||||||||||||||||||||||||||
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
| Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) | |||||
| Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) | |||||
| Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) | |||||
| Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) | |||||
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 | ||||||
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
| 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. ☐
The information in this report, including information contained in the exhibits submitted with this report, shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, or otherwise subject to the liabilities of Section 18, nor shall it be deemed incorporated by reference into any disclosure document relating to Fannie Mae (formally known as the Federal National Mortgage Association), except to the extent, if any, expressly incorporated by specific reference in that document.
Item 2.02 Results of Operations and Financial Condition.
On October 31, 2023, Fannie Mae filed its quarterly report on Form 10-Q for the quarter ended September 30, 2023 and is issuing a press release reporting its financial results for the periods covered by the Form 10-Q. Copies of the press release and a financial supplement are furnished as Exhibits 99.1 and 99.2, respectively, to this report and are incorporated herein by reference. Copies may also be found on Fannie Mae’s website, www.fanniemae.com, in the “About Us” section under “Investor Relations/Quarterly and Annual Results.” Information appearing on the company’s website is not incorporated into this report.
Item 9.01 Financial Statements and Exhibits.
(d) Exhibits. The following exhibits are being submitted with this report:
| Exhibit Number | Description of Exhibit | |||||||
| 99.1 | ||||||||
| 99.2 | ||||||||
| 104 | Cover Page Interactive Data File (embedded within the Inline XBRL document) | |||||||
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| FEDERAL NATIONAL MORTGAGE ASSOCIATION | ||||||||
| By: | /s/ Chryssa C. Halley | |||||||
| Chryssa C. Halley | ||||||||
| Executive Vice President and Chief Financial Officer | ||||||||
Date: October 31, 2023
Contact: Pete Bakel Resource Center: 1-800-232-6643
202-752-2034 Exhibit 99.1
Date: October 31, 2023
Fannie Mae Reports Net Income of $4.7 Billion for Third Quarter 2023
| • | $4.7 billion net income for the third quarter of 2023, with net worth reaching $73.7 billion as of September 30, 2023 | “The third quarter remained challenging for housing – with higher mortgage rates, high home prices, and a limited inventory of homes for sale. Renters, too, continued to face all-time high rents. Against this economic backdrop, Fannie Mae delivered strong third quarter results and remained a reliable source of liquidity and stability for America’s housing market. This quarter, we helped 428,000 households purchase, refinance, or rent a home, many of whom are low- to moderate-income borrowers or renters.” Priscilla Almodovar, Chief Executive Officer | ||||||||||||
| • | Net income decreased $295 million in the third quarter of 2023 compared with the second quarter of 2023, primarily driven by a decrease in benefit for credit losses, partially offset by an increase in fair value gains | |||||||||||||
| • | $106 billion in liquidity provided to the mortgage market in the third quarter of 2023 | |||||||||||||
| • | Acquired approximately 224,000 single-family purchase loans, of which more than 45% were for first-time homebuyers, and approximately 45,000 single-family refinance loans during the third quarter of 2023 | |||||||||||||
| • | Financed approximately 159,000 units of multifamily rental housing in the third quarter of 2023, a significant majority of which were affordable to households earning at or below 120% of area median income, providing support for both workforce and affordable housing | |||||||||||||
| • | Home prices grew 1.7% on a national basis in the third quarter of 2023, compared with a 3.8% increase in the second quarter of 2023 | |||||||||||||
| • | The U.S. weekly average 30-year fixed-rate mortgage rate increased from 6.71% as of the end of the second quarter of 2023 to 7.31% as of the end of the third quarter of 2023 | |||||||||||||
Q3 2023 Key Results | |||||||||||||||||||||||||||||||||||
$73.7 Billion Net Worth | $288 Billion Supporting Housing Activity | ||||||||||||||||||||||||||||||||||
Increase of $4.7 billion in the third quarter of 2023 | SF Home Purchases | SF Refinancings | MF Rental Units | ||||||||||||||||||||||||||||||||
$4.7 Billion Net Income for Q3 2023 | Serious Delinquency Rates | |||||||||||||||||||
Decrease of $295 million compared with second quarter 2023 | Single-Family SDQ Rate | Multifamily SDQ Rate | ||||||||||||||||||
Third Quarter 2023 Results | 1 | |||||||
| Summary of Financial Results | ||||||||||||||||||||||||||||||||||||||||||||
| (Dollars in millions) | Q323 | Q223 | Variance | % Change | Q322 | Variance | % Change | |||||||||||||||||||||||||||||||||||||
| Net interest income | $ | 7,220 | $ | 7,035 | $ | 185 | 3 | % | $ | 7,124 | $ | 96 | 1 | % | ||||||||||||||||||||||||||||||
| Fee and other income | 76 | 70 | 6 | 9 | % | 105 | (29) | (28) | % | |||||||||||||||||||||||||||||||||||
| Net revenues | 7,296 | 7,105 | 191 | 3 | % | 7,229 | 67 | 1 | % | |||||||||||||||||||||||||||||||||||
| Investment gains (losses), net | 8 | 25 | (17) | (68) | % | (172) | 180 | NM | ||||||||||||||||||||||||||||||||||||
| Fair value gains, net | 795 | 404 | 391 | 97 | % | 292 | 503 | 172 | % | |||||||||||||||||||||||||||||||||||
| Administrative expenses | (897) | (864) | (33) | (4) | % | (870) | (27) | (3) | % | |||||||||||||||||||||||||||||||||||
| Benefit (provision) for credit losses | 652 | 1,266 | (614) | (48) | % | (2,536) | 3,188 | NM | ||||||||||||||||||||||||||||||||||||
| TCCA fees | (860) | (856) | (4) | — | % | (850) | (10) | (1) | % | |||||||||||||||||||||||||||||||||||
Credit enhancement expense(1) | (390) | (384) | (6) | (2) | % | (364) | (26) | (7) | % | |||||||||||||||||||||||||||||||||||
| Change in expected credit enhancement recoveries | (128) | (160) | 32 | 20 | % | 290 | (418) | NM | ||||||||||||||||||||||||||||||||||||
Other expenses, net(2) | (535) | (257) | (278) | (108) | % | (154) | (381) | NM | ||||||||||||||||||||||||||||||||||||
| Income before federal income taxes | 5,941 | 6,279 | (338) | (5) | % | 2,865 | 3,076 | 107 | % | |||||||||||||||||||||||||||||||||||
| Provision for federal income taxes | (1,242) | (1,285) | 43 | 3 | % | (429) | (813) | (190) | % | |||||||||||||||||||||||||||||||||||
| Net income | $ | 4,699 | $ | 4,994 | $ | (295) | (6) | % | $ | 2,436 | $ | 2,263 | 93 | % | ||||||||||||||||||||||||||||||
| Total comprehensive income | $ | 4,681 | $ | 4,995 | $ | (314) | (6) | % | $ | 2,433 | $ | 2,248 | 92 | % | ||||||||||||||||||||||||||||||
| Net worth | $ | 73,725 | $ | 69,044 | $ | 4,681 | 7 | % | $ | 58,840 | $ | 14,885 | 25 | % | ||||||||||||||||||||||||||||||
| NM - Not meaningful | ||||||||||||||||||||||||||||||||||||||||||||
(1) Consists of costs associated with freestanding credit enhancements, which primarily include Connecticut Avenue Securities® and Credit Insurance Risk TransferTM programs, enterprise-paid mortgage insurance, and certain lender risk-sharing programs. | ||||||||||||||||||||||||||||||||||||||||||||
(2) Consists of debt extinguishment gains (losses), expenses associated with legal claims, foreclosed property income (expense), gains (losses) from partnership investments, housing trust fund expenses, loan subservicing costs, and servicer fees paid in connection with certain loss mitigation activities. | ||||||||||||||||||||||||||||||||||||||||||||
Financial Highlights | ||||||||
Net income decreased $295 million in the third quarter of 2023, compared with the second quarter of 2023, primarily driven by a decrease in benefit for credit losses, partially offset by an increase in fair value gains. | ||||||||
| • | Net interest income remained strong in the third quarter of 2023 primarily driven by base guaranty fee income. | |||||||
| • | Benefit for credit losses was $652 million in the third quarter of 2023, compared with $1.3 billion in the second quarter of 2023. The benefit for credit losses for the third quarter of 2023 was primarily driven by increases in actual and forecasted single-family home prices. This was partially offset by write-offs relating to the redesignation of certain single-family loans from held for investment to held for sale. | |||||||
| • | Fair value gains were $795 million in the third quarter of 2023, compared with $404 million in the second quarter of 2023. Fair value gains in the third quarter of 2023 were primarily due to increases in interest rates during the period. | |||||||
| • | Other expenses, net includes $491 million of expense in the third quarter of 2023 relating to a jury verdict and an award of prejudgment interest for Fannie Mae preferred shareholders. | |||||||
Third Quarter 2023 Results | 2 | |||||||
| Single-Family Business Financial Results | ||||||||||||||||||||||||||||||||||||||||||||
| (Dollars in millions) | Q323 | Q223 | Variance | % Change | Q322 | Variance | % Change | |||||||||||||||||||||||||||||||||||||
| Net interest income | $ | 6,074 | $ | 5,917 | $ | 157 | 3 | % | $ | 5,918 | $ | 156 | 3 | % | ||||||||||||||||||||||||||||||
| Fee and other income | 56 | 52 | 4 | 8 | % | 83 | (27) | (33) | % | |||||||||||||||||||||||||||||||||||
| Net revenues | 6,130 | 5,969 | 161 | 3 | % | 6,001 | 129 | 2 | % | |||||||||||||||||||||||||||||||||||
| Investment gains (losses), net | 9 | 27 | (18) | (67) | % | (178) | 187 | NM | ||||||||||||||||||||||||||||||||||||
| Fair value gains, net | 742 | 460 | 282 | 61 | % | 309 | 433 | 140 | % | |||||||||||||||||||||||||||||||||||
| Administrative expenses | (745) | (718) | (27) | (4) | % | (730) | (15) | (2) | % | |||||||||||||||||||||||||||||||||||
| Benefit (provision) for credit losses | 736 | 1,418 | (682) | (48) | % | (2,361) | 3,097 | NM | ||||||||||||||||||||||||||||||||||||
| TCCA fees | (860) | (856) | (4) | — | % | (850) | (10) | (1) | % | |||||||||||||||||||||||||||||||||||
| Credit enhancement expense | (335) | (327) | (8) | (2) | % | (298) | (37) | (12) | % | |||||||||||||||||||||||||||||||||||
| Change in expected credit enhancement recoveries | (170) | (223) | 53 | 24 | % | 245 | (415) | NM | ||||||||||||||||||||||||||||||||||||
| Other expenses, net | (411) | (203) | (208) | (102) | % | (165) | (246) | (149) | % | |||||||||||||||||||||||||||||||||||
| Income before federal income taxes | 5,096 | 5,547 | (451) | (8) | % | 1,973 | 3,123 | 158 | % | |||||||||||||||||||||||||||||||||||
| Provision for federal income taxes | (1,071) | (1,153) | 82 | 7 | % | (276) | (795) | NM | ||||||||||||||||||||||||||||||||||||
| Net income | $ | 4,025 | $ | 4,394 | $ | (369) | (8) | % | $ | 1,697 | $ | 2,328 | 137 | % | ||||||||||||||||||||||||||||||
| Average charged guaranty fee on new conventional acquisitions, net of TCCA fees* | 54.3 bps | 52.2 bps | 2.1 bps | 4 | % | 52.1 bps | 2.2 bps | 4 | % | |||||||||||||||||||||||||||||||||||
| Average charged guaranty fee on conventional guaranty book of business, net of TCCA fees* | 47.0 bps | 46.8 bps | 0.2 bps | — | % | 46.3 bps | 0.7 bps | 2 | % | |||||||||||||||||||||||||||||||||||
| NM - Not meaningful | ||||||||||||||||||||||||||||||||||||||||||||
| * In Q4 2022, the company enhanced the method it uses to estimate average loan life at acquisition. Charged fees reported for prior periods have been updated in this release to reflect this updated methodology. | ||||||||||||||||||||||||||||||||||||||||||||
Key Business Highlights | |||||
| • | Single-family conventional acquisition volume was $89.2 billion in the third quarter of 2023, consistent with the second quarter of 2023. Purchase acquisition volume, of which more than 45% was for first-time homebuyers, increased to $78.2 billion in the third quarter of 2023 from $76.4 billion in the second quarter of 2023. Refinance acquisition volume was $11.0 billion in the third quarter of 2023, a decrease from $12.8 billion in the second quarter of 2023. | ||||
| • | Average single-family conventional guaranty book of business in the third quarter of 2023 increased by $5.5 billion from the second quarter of 2023 driven by an increase in the average loan size of the book. Overall credit characteristics of the single-family conventional guaranty book of business remained strong, with a weighted-average mark-to-market loan-to-value ratio of 51% and a weighted-average FICO credit score at origination of 753 as of September 30, 2023. | ||||
| • | Average charged guaranty fee, net of TCCA fees, on the single-family conventional guaranty book remained relatively flat at 47.0 basis points as of September 30, 2023, compared with 46.8 basis points as of June 30, 2023. Average charged guaranty fee on newly acquired single-family conventional loans, net of TCCA fees, increased to 54.3 basis points for the third quarter of 2023, compared with 52.2 basis points for the second quarter of 2023. | ||||
| • | Single-family serious delinquency rate decreased to 0.54% as of September 30, 2023 from 0.55% as of June 30, 2023. Single-family seriously delinquent loans are loans that are 90 days or more past due or in the foreclosure process. | ||||
Third Quarter 2023 Results | 3 | |||||||
Multifamily Business Financial Results | ||||||||||||||||||||||||||||||||||||||||||||
| (Dollars in millions) | Q323 | Q223 | Variance | % Change | Q322 | Variance | % Change | |||||||||||||||||||||||||||||||||||||
| Net interest income | $ | 1,146 | $ | 1,118 | $ | 28 | 3 | % | $ | 1,206 | $ | (60) | (5) | % | ||||||||||||||||||||||||||||||
| Fee and other income | 20 | 18 | 2 | 11 | % | 22 | (2) | (9) | % | |||||||||||||||||||||||||||||||||||
| Net revenues | 1,166 | 1,136 | 30 | 3 | % | 1,228 | (62) | (5) | % | |||||||||||||||||||||||||||||||||||
| Fair value gains (losses), net | 53 | (56) | 109 | NM | (17) | 70 | NM | |||||||||||||||||||||||||||||||||||||
| Administrative expenses | (152) | (146) | (6) | (4) | % | (140) | (12) | (9) | % | |||||||||||||||||||||||||||||||||||
| Provision for credit losses | (84) | (152) | 68 | 45 | % | (175) | 91 | 52 | % | |||||||||||||||||||||||||||||||||||
| Credit enhancement expense | (55) | (57) | 2 | 4 | % | (66) | 11 | 17 | % | |||||||||||||||||||||||||||||||||||
| Change in expected credit enhancement recoveries | 42 | 63 | (21) | (33) | % | 45 | (3) | (7) | % | |||||||||||||||||||||||||||||||||||
| Other income (expenses), net* | (125) | (56) | (69) | (123) | % | 17 | (142) | NM | ||||||||||||||||||||||||||||||||||||
| Income before federal income taxes | 845 | 732 | 113 | 15 | % | 892 | (47) | (5) | % | |||||||||||||||||||||||||||||||||||
| Provision for federal income taxes | (171) | (132) | (39) | (30) | % | (153) | (18) | (12) | % | |||||||||||||||||||||||||||||||||||
| Net income | $ | 674 | $ | 600 | $ | 74 | 12 | % | $ | 739 | $ | (65) | (9) | % | ||||||||||||||||||||||||||||||
| Average charged guaranty fee rate on multifamily guaranty book of business, at period end | 76.8 bps | 77.4 bps | (0.6) bps | (1) | % | 79.0 bps | (2.2) bps | (3) | % | |||||||||||||||||||||||||||||||||||
| NM - Not meaningful | ||||||||||||||||||||||||||||||||||||||||||||
* Includes investment gains or losses and other income or expenses. | ||||||||||||||||||||||||||||||||||||||||||||
Key Business Highlights | |||||
| • | New multifamily business volume was $16.4 billion in the third quarter of 2023, compared with $15.1 billion in the second quarter of 2023. During the first nine months of 2023, new multifamily business volume was $41.7 billion. FHFA has capped the company’s multifamily loan purchases for 2023 at $75 billion. FHFA requires that a minimum of 50% of the company’s multifamily loan purchases must be mission-driven, focused on specified affordable and underserved market segments. | ||||
| • | The multifamily guaranty book of business grew by approximately 2% in the third quarter of 2023 to $464.7 billion. The average charged guaranty fee on the multifamily book declined slightly to 76.8 basis points as of September 30, 2023, compared with 77.4 basis points as of June 30, 2023. | ||||
| • | The multifamily serious delinquency rate increased to 0.54% as of September 30, 2023, compared with 0.37% as of June 30, 2023, largely driven by seniors housing portfolios. Multifamily seriously delinquent loans are loans that are 60 days or more past due. | ||||
Third Quarter 2023 Results | 4 | |||||||
| Additional Matters | ||
Fannie Mae’s Condensed Consolidated Balance Sheets and Condensed Consolidated Statements of Operations and Comprehensive Income for the third quarter of 2023 are available in the accompanying Annex; however, investors and interested parties should read the company’s Third Quarter 2023 Form 10-Q, which was filed today with the Securities and Exchange Commission and is available on Fannie Mae’s website, www.fanniemae.com. The company provides further discussion of its financial results and condition, credit performance, and other matters in its Third Quarter 2023 Form 10-Q. Additional information about the company’s financial and credit performance is contained in Fannie Mae’s “Q3 2023 Financial Supplement” at www.fanniemae.com.
# # #
Fannie Mae provides website addresses in its news releases solely for readers’ information. Other content or information appearing on these websites is not part of this release.
Fannie Mae advances equitable and sustainable access to homeownership and quality, affordable rental housing for millions of people across America. We enable the 30-year fixed-rate mortgage and drive responsible innovation to make homebuying and renting easier, fairer, and more accessible. To learn more, visit fanniemae.com.
Third Quarter 2023 Results | 5 | |||||||
ANNEX
FANNIE MAE
(In conservatorship)
Condensed Consolidated Balance Sheets — (Unaudited)
(Dollars in millions)
| As of | |||||||||||||||||||||||
| September 30, 2023 | December 31, 2022 | ||||||||||||||||||||||
| ASSETS | |||||||||||||||||||||||
| Cash and cash equivalents | $ | 48,604 | $ | 57,987 | |||||||||||||||||||
| Restricted cash and cash equivalents (includes $26,993 and $23,348, respectively, related to consolidated trusts) | 33,195 | 29,854 | |||||||||||||||||||||
| Securities purchased under agreements to resell (includes $900 and $3,475, respectively, related to consolidated trusts) | 22,850 | 14,565 | |||||||||||||||||||||
| Investments in securities, at fair value | 51,872 | 50,825 | |||||||||||||||||||||
| Mortgage loans: | |||||||||||||||||||||||
| Loans held for sale, at lower of cost or fair value | 2,587 | 2,033 | |||||||||||||||||||||
| Loans held for investment, at amortized cost: | |||||||||||||||||||||||
| Of Fannie Mae | 49,767 | 52,081 | |||||||||||||||||||||
| Of consolidated trusts | 4,090,205 | 4,071,669 | |||||||||||||||||||||
| Total loans held for investment (includes $3,207 and $3,645, respectively, at fair value) | 4,139,972 | 4,123,750 | |||||||||||||||||||||
| Allowance for loan losses | (8,671) | (11,347) | |||||||||||||||||||||
| Total loans held for investment, net of allowance | 4,131,301 | 4,112,403 | |||||||||||||||||||||
| Total mortgage loans | 4,133,888 | 4,114,436 | |||||||||||||||||||||
| Advances to lenders | 3,384 | 1,502 | |||||||||||||||||||||
| Deferred tax assets, net | 11,885 | 12,911 | |||||||||||||||||||||
| Accrued interest receivable, net (includes $9,861 and $9,241 related to consolidated trusts and net of allowance of $33 and $111, respectively) | 10,462 | 9,821 | |||||||||||||||||||||
| Other assets | 13,240 | 13,387 | |||||||||||||||||||||
| Total assets | $ | 4,329,380 | $ | 4,305,288 | |||||||||||||||||||
| LIABILITIES AND EQUITY | |||||||||||||||||||||||
| Liabilities: | |||||||||||||||||||||||
| Accrued interest payable (includes $9,998 and $9,347, respectively, related to consolidated trusts) | $ | 10,758 | $ | 9,917 | |||||||||||||||||||
| Debt: | |||||||||||||||||||||||
| Of Fannie Mae (includes $833 and $1,161, respectively, at fair value) | 125,652 | 134,168 | |||||||||||||||||||||
| Of consolidated trusts (includes $14,210 and $16,260, respectively, at fair value) | 4,106,110 | 4,087,720 | |||||||||||||||||||||
| Other liabilities (includes $1,715 and $1,748, respectively, related to consolidated trusts) | 13,135 | 13,206 | |||||||||||||||||||||
| Total liabilities | 4,255,655 | 4,245,011 | |||||||||||||||||||||
| Commitments and contingencies (Note 13) | — | — | |||||||||||||||||||||
| Fannie Mae stockholders’ equity: | |||||||||||||||||||||||
| Senior preferred stock (liquidation preference of $190,543 and $180,339, respectively) | 120,836 | 120,836 | |||||||||||||||||||||
| Preferred stock, 700,000,000 shares are authorized—555,374,922 shares issued and outstanding | 19,130 | 19,130 | |||||||||||||||||||||
| Common stock, no par value, no maximum authorization—1,308,762,703 shares issued and 1,158,087,567 shares outstanding | 687 | 687 | |||||||||||||||||||||
| Accumulated deficit | (59,546) | (73,011) | |||||||||||||||||||||
| Accumulated other comprehensive income | 18 | 35 | |||||||||||||||||||||
| Treasury stock, at cost, 150,675,136 shares | (7,400) | (7,400) | |||||||||||||||||||||
Total stockholders’ equity (See Note 1: Senior Preferred Stock Purchase Agreement and Senior Preferred Stock for information on the related dividend obligation and liquidation preference) | 73,725 | 60,277 | |||||||||||||||||||||
| Total liabilities and equity | $ | 4,329,380 | $ | 4,305,288 | |||||||||||||||||||
See Notes to Condensed Consolidated Financial Statements in the Third Quarter 2023 Form 10-Q
Third Quarter 2023 Results | 6 | |||||||
FANNIE MAE
(In conservatorship)
Condensed Consolidated Statements of Operations and Comprehensive Income — (Unaudited)
(Dollars in millions, except per share amounts)
| For the Three Months Ended September 30, | For the Nine Months Ended September 30, | ||||||||||||||||||||||||||||||||||||||||||||||
| 2023 | 2022 | 2023 | 2022 | ||||||||||||||||||||||||||||||||||||||||||||
| Interest income: | |||||||||||||||||||||||||||||||||||||||||||||||
| Investments in securities | $ | 1,075 | $ | 525 | $ | 3,157 | $ | 1,009 | |||||||||||||||||||||||||||||||||||||||
| Mortgage loans | 33,711 | 30,114 | 98,503 | 86,338 | |||||||||||||||||||||||||||||||||||||||||||
| Other | 629 | 211 | 1,665 | 298 | |||||||||||||||||||||||||||||||||||||||||||
| Total interest income | 35,415 | 30,850 | 103,325 | 87,645 | |||||||||||||||||||||||||||||||||||||||||||
| Interest expense: | |||||||||||||||||||||||||||||||||||||||||||||||
| Short-term debt | (201) | (17) | (503) | (23) | |||||||||||||||||||||||||||||||||||||||||||
| Long-term debt | (27,994) | (23,709) | (81,781) | (65,291) | |||||||||||||||||||||||||||||||||||||||||||
| Total interest expense | (28,195) | (23,726) | (82,284) | (65,314) | |||||||||||||||||||||||||||||||||||||||||||
| Net interest income | 7,220 | 7,124 | 21,041 | 22,331 | |||||||||||||||||||||||||||||||||||||||||||
| Benefit (provision) for credit losses | 652 | (2,536) | 1,786 | (2,994) | |||||||||||||||||||||||||||||||||||||||||||
| Net interest income after benefit (provision) for credit losses | 7,872 | 4,588 | 22,827 | 19,337 | |||||||||||||||||||||||||||||||||||||||||||
| Investment gains (losses), net | 8 | (172) | (34) | (323) | |||||||||||||||||||||||||||||||||||||||||||
| Fair value gains, net | 795 | 292 | 1,403 | 1,301 | |||||||||||||||||||||||||||||||||||||||||||
| Fee and other income | 76 | 105 | 209 | 269 | |||||||||||||||||||||||||||||||||||||||||||
| Non-interest income | 879 | 225 | 1,578 | 1,247 | |||||||||||||||||||||||||||||||||||||||||||
| Administrative expenses: | |||||||||||||||||||||||||||||||||||||||||||||||
| Salaries and employee benefits | (477) | (439) | (1,424) | (1,244) | |||||||||||||||||||||||||||||||||||||||||||
| Professional services | (211) | (229) | (587) | (636) | |||||||||||||||||||||||||||||||||||||||||||
| Other administrative expenses | (209) | (202) | (618) | (593) | |||||||||||||||||||||||||||||||||||||||||||
| Total administrative expenses | (897) | (870) | (2,629) | (2,473) | |||||||||||||||||||||||||||||||||||||||||||
| TCCA fees | (860) | (850) | (2,571) | (2,515) | |||||||||||||||||||||||||||||||||||||||||||
| Credit enhancement expense | (390) | (364) | (1,115) | (974) | |||||||||||||||||||||||||||||||||||||||||||
| Change in expected credit enhancement recoveries | (128) | 290 | (168) | 303 | |||||||||||||||||||||||||||||||||||||||||||
| Other expenses, net | (535) | (154) | (922) | (612) | |||||||||||||||||||||||||||||||||||||||||||
| Total expenses | (2,810) | (1,948) | (7,405) | (6,271) | |||||||||||||||||||||||||||||||||||||||||||
| Income before federal income taxes | 5,941 | 2,865 | 17,000 | 14,313 | |||||||||||||||||||||||||||||||||||||||||||
| Provision for federal income taxes | (1,242) | (429) | (3,535) | (2,816) | |||||||||||||||||||||||||||||||||||||||||||
| Net income | 4,699 | 2,436 | 13,465 | 11,497 | |||||||||||||||||||||||||||||||||||||||||||
| Other comprehensive loss | (18) | (3) | (17) | (14) | |||||||||||||||||||||||||||||||||||||||||||
| Total comprehensive income | $ | 4,681 | $ | 2,433 | $ | 13,448 | $ | 11,483 | |||||||||||||||||||||||||||||||||||||||
| Net income | $ | 4,699 | $ | 2,436 | $ | 13,465 | $ | 11,497 | |||||||||||||||||||||||||||||||||||||||
Dividends distributed or amounts attributable to senior preferred stock | (4,681) | (2,433) | (13,448) | (11,483) | |||||||||||||||||||||||||||||||||||||||||||
| Net income attributable to common stockholders | $ | 18 | $ | 3 | $ | 17 | $ | 14 | |||||||||||||||||||||||||||||||||||||||
| Earnings per share: | |||||||||||||||||||||||||||||||||||||||||||||||
| Basic | $ | 0.00 | $ | 0.00 | $ | 0.00 | $ | 0.00 | |||||||||||||||||||||||||||||||||||||||
| Diluted | 0.00 | 0.00 | 0.00 | 0.00 | |||||||||||||||||||||||||||||||||||||||||||
| Weighted-average common shares outstanding: | |||||||||||||||||||||||||||||||||||||||||||||||
| Basic | 5,867 | 5,867 | 5,867 | 5,867 | |||||||||||||||||||||||||||||||||||||||||||
| Diluted | 5,893 | 5,893 | 5,893 | 5,893 | |||||||||||||||||||||||||||||||||||||||||||
See Notes to Condensed Consolidated Financial Statements in the Third Quarter 2023 Form 10-Q
Third Quarter 2023 Results | 7 | |||||||
© 2023 Fannie Mae DRAFT Financial Supplement Q3 2023 October 31, 2023 EXHIBIT 99.2
Q3 2023 Financial Supplement 2© 2023 Fannie Mae DRAFT ▪ Some of the terms and other information in this presentation are defined and discussed more fully in Fannie Mae’s Form 10-Q for the quarter ended September 30, 2023 (“Q3 2023 Form 10-Q”) and Form 10-K for the year ended December 31, 2022 (“2022 Form 10-K”). This presentation should be reviewed together with the Q3 2023 Form 10-Q and the 2022 Form 10-K, which are available at www.fanniemae.com in the “About Us—Investor Relations—SEC Filings” section. Information on or available through the company’s website is not part of this supplement. ▪ Some of the information in this presentation is based upon information from third-party sources such as sellers and servicers of mortgage loans. Although Fannie Mae generally considers this information reliable, Fannie Mae does not independently verify all reported information. ▪ Due to rounding, amounts reported in this presentation may not sum to totals indicated (i.e., 100%), or amounts shown as 100% may not reflect the entire population. ▪ Unless otherwise indicated, data is as of September 30, 2023 or for the first nine months of 2023. Data for prior years is as of December 31 or for the full year indicated. ▪ Note references are to endnotes, appearing on pages 22 to 24. ▪ Terms used in presentation CAS: Connecticut Avenue Securities® CIRT™: Credit Insurance Risk Transfer™ CRT: Credit risk transfer DSCR: Weighted-average debt service coverage ratio DTI ratio: Debt-to-income (“DTI”) ratio refers to the ratio of a borrower’s outstanding debt obligations (including both mortgage debt and certain other long-term and significant short-term debts) to that borrower’s reported or calculated monthly income, to the extent the income is used to qualify for the mortgage DUS®: Fannie Mae’s Delegated Underwriting and Servicing program HARP®: Home Affordable Refinance Program®, registered trademarks of the Federal Housing Finance Agency, which allowed eligible Fannie Mae borrowers with high LTV ratio loans to refinance into more sustainable loans LTV ratio: Loan-to-value ratio MSA: Metropolitan statistical area MTMLTV ratio: Mark-to-market loan-to-value ratio, which refers to the current unpaid principal balance of a loan at period end, divided by the estimated current home price at period end OLTV ratio: Origination loan-to-value ratio, which refers to the unpaid principal balance of a loan at the time of origination of the loan, divided by the home price or property value at origination of the loan Refi Plus™: Refi Plus initiative, which offered refinancing flexibility to eligible Fannie Mae borrowers REO: Real estate owned by Fannie Mae because it has foreclosed on the property or obtained the property through a deed-in-lieu of foreclosure TCCA fees: Refers to revenues generated by the 10 basis point guaranty fee increase the company implemented on single-family residential mortgages pursuant to the Temporary Payroll Tax Cut Continuation Act of 2011 (“TCCA”) and as extended by the Infrastructure Investment and Jobs Act, the incremental revenue from which is remitted to Treasury and not retained by the company UPB: Unpaid principal balance
Q3 2023 Financial Supplement 3© 2023 Fannie Mae DRAFTTable of Contents Overview Corporate Financial Highlights 5 Guaranty Book of Business Highlights 6 Interest Income and Liquidity Management 7 Key Market Economic Indicators 8 Single-Family Business Single-Family Highlights 10 Credit Characteristics of Single-Family Conventional Loan Acquisitions 11 Credit Characteristics of Single-Family Conventional Guaranty Book of Business 12 Single-Family Credit Risk Transfer 13 Single-Family Problem Loan Statistics 14 Single-Family Cumulative Default Rates 15 Multifamily Business Multifamily Highlights 17 Credit Characteristics of Multifamily Loan Acquisitions 18 Credit Characteristics of Multifamily Guaranty Book of Business 19 Multifamily Credit Loss and Serious Delinquency Rates 20 Endnotes Endnotes 22
© 2023 Fannie Mae DRAFT Overview
Q3 2023 Financial Supplement 5© 2023 Fannie Mae DRAFT Net income decreased $295 million in the third quarter of 2023, compared with the second quarter of 2023, primarily driven by a decrease in benefit for credit losses, partially offset by an increase in fair value gains. Net interest income Net interest income remained strong in the third quarter of 2023 primarily driven by base guaranty fee income. Benefit (provision) for credit losses Benefit for credit losses was $652 million in the third quarter of 2023, compared with $1.3 billion in the second quarter of 2023. The benefit for credit losses in the third quarter of 2023 was primarily driven by increases in actual and forecasted single-family home prices. This was partially offset by write-offs relating to the redesignation of certain single-family loans from held for investment to held for sale. Fair value gains, net Fair value gains were $795 million in the third quarter of 2023, compared with $404 million in the second quarter of 2023. Fair value gains in the third quarter of 2023 were primarily due to increases in interest rates during the period. Other expenses, net Other expenses, net includes $491 million of expense in the third quarter of 2023 relating to a jury verdict and an award of prejudgment interest for Fannie Mae preferred shareholders. Corporate Financial Highlights (Dollars in millions) Q3 2023 Q2 2023 Variance Q3 YTD 2023 Q3 YTD 2022 Variance Net interest income $7,220 $7,035 $185 $21,041 $22,331 $(1,290) Fee and other income 76 70 6 209 269 (60) Net revenues 7,296 7,105 191 21,250 22,600 (1,350) Investment gains (losses), net 8 25 (17) (34) (323) 289 Fair value gains, net 795 404 391 1,403 1,301 102 Administrative expenses (897) (864) (33) (2,629) (2,473) (156) Benefit (provision) for credit losses 652 1,266 (614) 1,786 (2,994) 4,780 TCCA fees (860) (856) (4) (2,571) (2,515) (56) Credit enhancement expense (390) (384) (6) (1,115) (974) (141) Change in expected credit enhancement recoveries (128) (160) 32 (168) 303 (471) Other expenses, net(1) (535) (257) (278) (922) (612) (310) Income before federal income taxes 5,941 6,279 (338) 17,000 14,313 2,687 Provision for federal income taxes (1,242) (1,285) 43 (3,535) (2,816) (719) Net income $4,699 $4,994 $(295) $13,465 $11,497 $1,968 Total comprehensive income $4,681 $4,995 $(314) $13,448 $11,483 $1,965 Net worth $73,725 $69,044 $4,681 $73,725 $58,840 $14,885 Net worth ratio(2) 1.7 % 1.6 % 1.7 % 1.4 % Summary of Q3 2023 Financial Results Q3 2023 Key Highlights $4.7 billion Net Income in Q3 2023, with Net Worth Reaching $73.7 billion as of September 30, 2023
Q3 2023 Financial Supplement 6© 2023 Fannie Mae DRAFT U P B (D ol la rs in tr illi on s) $3.3 $3.6 $3.9 $4.1 $4.1 $0.3 $0.4 $0.4 $0.4 $0.5 $3.0 $3.2 $3.5 $3.6 $3.6 2019 2020 2021 2022 Q3 YTD 2023 $0.0 $1.0 $2.0 $3.0 $4.0 $5.0 Guaranty Book of Business Highlights Outstanding Guaranty Book of Business at Period End Guaranty Book of Business in a CRT U P B (D ol la rs in b illi on s) $70 $76 $69 $69 $283 $948 $904 $237 $313 $411 $451 $378 $211 $666 $1,435 $1,424 $684 $288 2019 2020 2021 2022 Q3 YTD 2023 $0 $500 $1,000 Single-Family Home Purchases Multifamily Rental Units Single-Family Refinancings Market Liquidity Provided Total liquidity provided in the third quarter of 2023 was $106B Unpaid Principal Balance Units $78B 224K Single-Family Home Purchases $11B 45K Single-Family Refinancings $16B 159K Multifamily Rental Units U P B (D ol la rs in b illi on s) $1,425 $1,056 $862 $1,219 $1,384 $84 $101 $112 $113 $115 $1,341 $955 $750 $1,106 $1,269 2019 2020 2021 2022 Q3 YTD 2023 $0 $500 $1,000 $1,500 Outstanding UPB of single-family loans in a CRT transaction(24) Outstanding UPB of multifamily loans in a CRT transaction UPB outstanding of single-family conventional guaranty book of business(4) UPB outstanding of multifamily guaranty book of business(5)
Q3 2023 Financial Supplement 7© 2023 Fannie Mae DRAFTInterest Income and Liquidity Management Components of Net Interest Income Net Worth of Fannie Mae Aggregate Indebtedness of Fannie Mae(11) Other Investments Portfolio ("OIP") N et In te re st In co m e (D ol la rs in b illi on s) $21.3 $24.9 $29.6 $29.4 $21.0 $9.7 $11.2 $14.2 $16.1 $12.1 $2.4 $2.7 $3.1 $3.3 $2.6 $5.9 $9.1 $11.2 $7.1 $2.6 $3.3 $1.9 $1.1 $2.9 $3.7 2019 2020 2021 2022 Q3 YTD 2023 $0 $10 $20 $30 Base guaranty fee income, net of TCCA(9) Net amortization income(3) Base guaranty fee income related to TCCA Net interest income from portfolios(10) (D ol la rs in b illi on s) $14.0 $15.6 $14.2 $131.9 $129.1 $129.8 $127.2 $116.5 $134.9 $139.3 $143.8 $142.8 $130.7 Q3 2022 Q4 2022 Q1 2023 Q2 2023 Q3 2023 $0 $50 $100 $150 (D ol la rs in b illi on s) $35.6 $58.0 $60.3 $52.2 $48.6 $10.8 $11.1 $21.5 $22.6 $22.0 $54.7 $46.9 $47.5 $48.2 $48.6 $101.1 $116.0 $129.3 $123.0 $119.2 Q3 2022 Q4 2022 Q1 2023 Q2 2023 Q3 2023 $0 $50 $100 $150 Cash and cash equivalents(12) Securities purchased under agreements to resell U.S. Treasury securities Short-term debt Long-term debt (D ol la rs in b illi on s) $14.6 $25.3 $47.4 $60.3 $73.7 2019 2020 2021 2022 Q3 YTD 2023 $0 $15 $30 $45 $60 $75
Q3 2023 Financial Supplement 8© 2023 Fannie Mae DRAFT R at e (a s of p er io d en d) 3.6% 6.7% 3.9% 3.5% 3.5% 3.6% 3.8%3.2% (1.1)% 5.4% 0.7% 2.2% 2.1% 4.9% 2019 2020 2021 2022 Q1 2023 Q2 2023 Q3 2023 -5% 0% 5% 10% Key Market Economic Indicators 0.68% 1.49% 3.83% 4.57% 1.40% 1.97% 5.68% 6.36% 2.90% 3.01% 6.70% 7.31% 9/30/2020 9/30/2021 9/30/2022 9/30/2023 Top 10 States by UPB(15) State One Year Home Price Growth Rate Q3 2023 Share of Single-Family Conventional Guaranty Book CA 3.7% 19% TX 1.1% 7% FL 3.9% 6% NY 6.5% 5% WA 1.3% 4% CO 2.2% 3% NJ 10.3% 3% IL 8.0% 3% VA 7.5% 3% NC 5.8% 3% H om e P ric e G ro w th 4.3% 10.4% 18.3% 8.0% 6.9% 2019 2020 2021 2022 Q3 YTD 2023 0% 5% 10% 15% 20% Benchmark Interest Rates U.S. GDP Growth (Decline) Rate and Unemployment Rate(14) One Year Home Price Growth Rate Q3 2023(15) United States 5.3% Single-Family Home Price Growth Rate(15) Growth (decline) in GDP U.S. unemployment rate30-year FRM rate(13) 10-year Treasury rate 30-year Fannie Mae MBS par coupon rate State Growth Rate: (4.99)% to (0.01)% 0.00% to 2.49% 2.50% to 4.99% > 5.00%
© 2023 Fannie Mae DRAFT Single-Family Business
Q3 2023 Financial Supplement 10© 2023 Fannie Mae DRAFT Fannie Mae 30% Freddie Mac 29% Ginnie Mae 37% Private-label securities 4% U P B (D ol la rs in b illi on s) $3,621 $3,632 $3,632 $3,630 $3,636 46.3 46.5 46.6 46.8 47.0 Q3 2022 Q4 2022 Q1 2023 Q2 2023 Q3 2023 $0 $1,000 $2,000 $3,000 $4,000 0 10 20 30 40 50 U P B (D ol la rs in b illi on s) $92 $71 $57 $76 $78 $26 $14 $11 $13 $11 52.1 49.3 51.6 52.2 54.3 $118 $85 $68 $89 $89 Q3 2022 Q4 2022 Q1 2023 Q2 2023 Q3 2023 $0 $100 $200 0 10 20 30 40 50 Single-Family Highlights Q3 2023 $6,074M Net interest income $9M Investment gains, net $742M Fair value gains, net $736M Benefit for credit losses $4,025M Net income Single-Family Conventional Loan Acquisitions(4) Single-Family Conventional Guaranty Book of Business(4) Q3 2023 Single-Family Mortgage-Related Securities Share of Issuances Highlights Refinance Purchase Average charged guaranty fee on new single-family conventional acquisitions, net of TCCA fees (bps)(16) Average single-family conventional guaranty book of business Average charged guaranty fee on single-family conventional guaranty book of business, net of TCCA fees (bps)(16) • Single-family conventional acquisition volume was $89.2 billion in Q3 2023, consistent with Q2 2023. • Purchase acquisition volume, of which more than 45% was for first- time homebuyers, increased to $78.2 billion in Q3 2023 from $76.4 billion in Q2 2023. • Refinance acquisition volume was $11.0 billion in Q3 2023, a decline from $12.8 billion in Q2 2023. • Average single-family conventional guaranty book of business in Q3 2023 increased by $5.5 billion from Q2 2023 driven by an increase in the average loan size of the book. • Single-family serious delinquency rate decreased to 0.54% as of September 30, 2023 from 0.55% as of June 30, 2023.
Q3 2023 Financial Supplement 11© 2023 Fannie Mae DRAFT S ha re o f A cq ui si tio ns 52% 30% 33% 62% 86% 28% 51% 43% 13% 4%20% 19% 24% 25% 10% 2019 2020 2021 2022 Q3 YTD 2023 0% 25% 50% 75% 100% W ei gh te d- Av er ag e FI C O C re di t S co re FIC O C redit S core < 680 749 760 756 747 755 7.3% 4.0% 6.0% 8.0% 6.0% 2019 2020 2021 2022 Q3 YTD 2023 0 200 400 600 800 0% 5% 10% 15% 20% 25% Credit Characteristics of Single-Family Conventional Loan Acquisitions Certain Credit Characteristics of Single-Family Conventional Loans by Acquisition Period Q3 YTD 2023 Acquisition Credit Profile by Certain Loan Features Categories are not mutually exclusive Q3 2022 Q4 2022 Full Year 2022 Q1 2023 Q2 2023 Q3 2023 OLTV Ratio >95% Home- Ready®(18) FICO Credit Score < 680(7) DTI Ratio > 43%(17) Total UPB (Dollars in billions) $117.7 $85.3 $614.8 $67.5 $89.2 $89.2 $15.8 $10.3 $13.6 $86.4 Weighted-Average OLTV Ratio 78% 78% 75% 79% 78% 78% 97% 86% 72% 80% OLTV Ratio > 95% 6% 6% 5% 6% 7% 7% 100% 28% 3% 7% Weighted-Average FICO® Credit Score(7) 746 749 747 751 756 757 750 750 656 750 FICO Credit Score < 680(7) 8% 7% 8% 6% 5% 5% 2% 5% 100% 6% DTI Ratio > 43%(17) 35% 37% 32% 38% 34% 35% 37% 56% 39% 100% Fixed-rate 98% 98% 99% 98% 99% 99% 100% 100% 100% 99% Primary Residence 91% 91% 91% 91% 92% 93% 100% 100% 95% 93% HomeReady®(18) 3% 4% 3% 4% 4% 5% 18% 100% 4% 7% W ei gh te d- Av er ag e O LT V R at io O rigination LTV > 95% 76% 71% 69% 75% 78% 6.6% 2.0% 3.0% 5.0% 6.0% 2019 2020 2021 2022 Q3 YTD 2023 0% 20% 40% 60% 80% 100% 0% 5% 10% 15% 20% 25% Origination Loan-to-Value Ratio FICO Credit Score(7) Acquisitions by Loan Purpose Weighted-Average OLTV Ratio % OLTV > 95% Weighted-Average FICO Credit Score % FICO Credit Score < 680 Cash-out Refinance Purchase Other Refinance
Q3 2023 Financial Supplement 12© 2023 Fannie Mae DRAFT S er io us D el in qu en cy R at e (% ) 0.66% 2.87% 1.25% 0.65% 0.54% 2019 2020 2021 2022 Q3 YTD 2023 0% 1% 2% 3% Certain Credit Characteristics of Single-Family Conventional Guaranty Book of Business by Origination Year and Loan Features(4)(20) As of September 30, 2023 Origination Year Certain Loan Features Categories are not mutually exclusive Overall Book 2008 & Earlier 2009-2019 2020 2021 2022 2023 OLTV Ratio > 95% Home- Ready®(18) FICO Credit Score < 680(7) Refi Plus Including HARP(19) DTI Ratio > 43%(17) Total UPB (Dollars in billions) $3,639.4 $67.7 $873.0 $876.7 $1,105.3 $502.8 $213.9 $174.0 $111.4 $281.7 $112.3 $904.2 Average UPB $207,661 $77,874 $134,875 $244,702 $263,063 $291,603 $316,743 $176,875 $179,887 $161,754 $100,044 $230,746 Share of SF Conventional Guaranty Book 100% 2% 24% 24% 30% 14% 6% 5% 3% 8% 3% 25% Loans in Forbearance by UPB(21) 0.2% 0.3% 0.2% 0.1% 0.2% 0.4% 0.1% 0.4% 0.3% 0.8% 0.2% 0.4% Share of Loans with Credit Enhancement(22) 45% 9% 46% 31% 52% 59% 41% 84% 80% 42% 39% 50% Serious Delinquency Rate(8) 0.54% 2.18% 0.67% 0.25% 0.34% 0.47% 0.04% 1.25% 0.98% 2.09% 0.70% 0.83% Weighted-Average OLTV Ratio 73% 75% 75% 71% 70% 76% 78% 102% 87% 74% 85% 75% OLTV Ratio > 95% 5% 9% 8% 3% 3% 5% 7% 100% 34% 6% 29% 6% Weighted-Average Mark-to-Market LTV Ratio(6) 51% 30% 34% 47% 54% 69% 76% 66% 64% 49% 30% 54% Weighted-Average FICO Credit Score(7) 753 696 747 762 755 747 755 736 743 652 726 742 FICO Credit Score < 680(7) 8% 38% 11% 4% 7% 9% 5% 10% 9% 100% 23% 10% Credit Characteristics of Single-Family Conventional Guaranty Book of Business W ei gh te d- Av er ag e FI C O C re di t S co re FIC O C redit S core < 680 746 750 753 752 753 10.5% 9.0% 8.1% 9.0% 8.0% 2019 2020 2021 2022 Q3 YTD 2023 0 200 400 600 800 0% 5% 10% 15% 20% 25% W ei gh te d- Av er ag e M TM LT V 57% 58% 54% 52% 51% 0.3% 0.1% 0.0%* 0.1% 0.0%* 2019 2020 2021 2022 Q3 YTD 2023 0% 10% 20% 30% 40% 50% 60% 70% 0% 0.5% 1% 1.5% 2% Mark-to-Market Loan-to-Value (MTMLTV) Ratio(6) FICO Credit Score(7) SDQ Rate(8) % MTMLTV > 100% Weighted-Average MTMLTV * Represents less than 0.05% of MTMLTV > 100% % FICO Credit Score < 680 Weighted-Average FICO Credit Score
Q3 2023 Financial Supplement 13© 2023 Fannie Mae DRAFT U P B (D ol la rs in b illi on s) $102 $86 $82 $67 $63 $213 $110 $265 $206 $290 $58 $142 $322 $142 $44 $45 $73 $57 $410 $338 $445 $182 $205 $535 $252 2017 2018 2019 2020 2021 2022 Q3 YTD 2023 $0 $200 $400 $600 Single-Family Credit Risk Transfer U P B (D ol la rs in b illi on s) $1,112 $1,106 $1,168 $1,257 $1,269 31% 31% 32% 34% 35% Q3 2022 Q4 2022 Q1 2023 Q2 2023 Q3 2023 $0 $500 $1,000 $1,500 0% 10% 20% 30% 40% 2021 2022 Q3 YTD 2023 Credit Enhancement Outstanding UPB (Dollars in billions) Outstanding UPB % of Book(27) Outstanding Outstanding UPB % of Book(27) Outstanding Outstanding UPB % of Book(27) Outstanding Primary mortgage insurance and other(25) $697 20% $754 21% $763 21% Connecticut Avenue Securities(26) 512 14 726 20 819 23 Credit Insurance Risk Transfer(24) 168 5 323 9 397 11 Lender risk-sharing(26) 70 2 57 2 53 1 Less: loans covered by multiple credit enhancements (253) (7) (351) (10) (390) (11) Total single-family loans with credit enhancement $1,194 34% $1,509 42% $1,642 45% Single-Family Credit Risk Transfer Issuance Single-Family Credit Risk Transfer Single-Family Loans with Credit Enhancement % Single-family conventional guaranty book of business in a CRT transaction Outstanding UPB of single-family loans in a CRT transaction(24) Lender risk-sharing Connecticut Avenue Securities Credit Insurance Risk Transfer
Q3 2023 Financial Supplement 14© 2023 Fannie Mae DRAFT U P B (D ol la rs in b illi on s) N um ber of Loan W orkouts $7.7 $5.3 $8.4 $16.6 $56.0 $62.1 $18.4 $8.6 56.3K 299.2K 342.7K 167.3K 66.4K 2019 2020 2021 2022 Q3 YTD 2023 $0 $25 $50 $75 $100 $125 0K 50K 100K 150K 200K 250K 300K R E O E nd in g In ve nt or y (U ni ts in th ou sa nd s) 18 8 7 9 9 2019 2020 2021 2022 Q3 YTD 2023 0 10 20 30 Single-Family Problem Loan Statistics State Serious Delinquency Rate(8) Average Months to Foreclosure(28) CA 0.41% 24 TX 0.60% 28 FL 0.69% 46 NY 0.95% 76 WA 0.38% 40 CO 0.35% 24 NJ 0.66% 52 IL 0.69% 31 VA 0.36% 25 NC 0.40% 30 Single-Family Serious Delinquency Rate by State as of September 30, 2023(8) Top 10 States by UPB Single-Family Loan Workouts(30) Single-Family REO Ending Inventory Less than 0.50% 0.76% to 0.99% 0.50% to 0.75% 1.00% and above Other(29) Total Loan Workouts Modifications Payment Deferrals $71.4 $62.9 $9.3 $35.3 $14.7 State SDQ Rate:
Q3 2023 Financial Supplement 15© 2023 Fannie Mae DRAFT Time Since Beginning of Origination Year C um ul at iv e D ef au lt R at e 2004* 2005* 2006* 2007* 2008* 2009** 2010** 2011** 2012** 2013** 2014** 2015** 2016** 2017** 2018** 2019** 2020** 2021** 2022** 2023** Y r1 Y r2 Y r3 Y r4 Y r5 Y r6 Y r7 Y r8 Y r9 Y r1 0 Y r1 1 Y r1 2 Y r1 3 Y r1 4 Y r 1 5 Y r 1 6 Y r 1 7 Y r 1 8 Y r 1 9 Y r 2 0 0% 2% 4% 6% 8% 10% 12% 14% 16% 18% Single-Family Cumulative Default Rates Cumulative Default Rates of Single-Family Conventional Guaranty Book of Business by Origination Year(40) * Loans originated prior to 2009 represent only 2% of the single-family conventional guaranty book of business as of September 30, 2023. ** As of September 30, 2023, cumulative default rates on the loans originated in each individual year from 2009-2023 were less than 1%. 2007 2009 2006 201020112012 2004 2008 2005
© 2023 Fannie Mae DRAFT Multifamily Business
Q3 2023 Financial Supplement 17© 2023 Fannie Mae DRAFT U P B (D ol la rs in b illi on s) $429.4 $440.4 $445.4 $454.7 $464.7 79.0 78.5 78.1 77.4 76.8 Q3 2022 Q4 2022 Q1 2023 Q2 2023 Q3 2023 $0 $150 $300 $450 0 25 50 75 U P B (D ol la rs in b illi on s) $15.9 $18.6 $10.2 $15.1 $16.4 Q3 2022 Q4 2022 Q1 2023 Q2 2023 Q3 2023 $0 $5 $10 $15 $20 $25 Multifamily Highlights Q3 2023 $1,146M Net interest income $20M Fee and other income $(84)M Provision for credit losses $42M Change in expected credit enhancement recoveries $674M Net income Multifamily New Business Volume Multifamily Guaranty Book of Business(5) Multifamily Credit Risk Transfer Highlights U P B (D ol la rs in b illi on s) 25.3 25.1 25.1 25.0 24.8 89.5 87.7 86.3 91.9 90.6 27% 26% 25% 26% 25% $114.8 $112.8 $111.4 $116.9 $115.4 Q3 2022 Q4 2022 Q1 2023 Q2 2023 Q3 2023 $0 $25 $50 $75 $100 10% 20% 30% 40% Average charged guaranty fee on multifamily guaranty book of business (in bps) at period end UPB outstanding of multifamily guaranty book of business UPB outstanding of multifamily loans in a Multifamily Connecticut Avenue SecuritiesTM transaction % Multifamily guaranty book in a Multifamily CRT transaction UPB outstanding of multifamily loans in a Multifamily CIRT transaction • New multifamily business volume was $16.4 billion in Q3 2023. FHFA has capped the company's multifamily loan purchases for 2023 at $75 billion. FHFA requires that a minimum of 50% of the company's multifamily loan purchases must be mission-driven, focused on specified affordable and underserved market segments. • The multifamily guaranty book of business grew by approximately 2% in Q3 2023 to $464.7 billion. • The average charged guaranty fee on the multifamily book declined slightly to 76.8 basis points as of September 30, 2023, compared with 77.4 basis points as of June 30, 2023. • The multifamily serious delinquency rate increased to 0.54% as of September 30, 2023, compared with 0.37% as of June 30, 2023, largely driven by seniors housing portfolios.
Q3 2023 Financial Supplement 18© 2023 Fannie Mae DRAFT S ha re o f A cq ui si tio ns 93% 93% 89% 78% 99% 7% 7% 11% 22% 2019 2020 2021 2022 Q3 YTD 2023 0% 20% 40% 60% 80% 100% Credit Characteristics of Multifamily Loan Acquisitions Certain Credit Characteristics of Multifamily Loans by Acquisition Period(5) Categories are not mutually exclusive 2019 2020 2021 2022 Q3 YTD 2023 Total UPB (Dollars in billions) $70.2 $76.0 $69.5 $69.2 $41.7 Weighted-Average OLTV Ratio 66% 64% 65% 59% 59% Loan Count 4,113 5,051 4,203 3,572 2,246 % Lender Recourse(31) 100% 99% 100% 100% 100% % DUS(32) 100% 99% 99% 99% 99% % Full Interest-Only 33% 38% 40% 53% 64% Weighted-Average OLTV Ratio on Full Interest-Only Acquisitions 59% 58% 59% 56% 57% Weighted-Average OLTV Ratio on Non-Full Interest-Only Acquisitions 69% 68% 68% 63% 63% % Partial Interest-Only(33) 56% 50% 50% 39% 31% S ha re o f A cq ui si tio ns 33% 29% 27% 14% 7% 66% 70% 72% 86% 93% 2019 2020 2021 2022 Q3 YTD 2023 0% 20% 40% 60% 80% 100% $1.9B $1.8B $1.7B $1.6B$1.4B $1.4B $1.3B $1.2B $1.1B $1.0B Share of Acquisitions: 34.5% Total Top 10 UPB: $14.4B Origination Loan-to-Value Ratio(5) Top 10 MSAs by Q3 YTD 2023 Acquisition UPB(5) Acquisitions by Note Type(5) % OLTV ratio less than or equal to 70% % OLTV ratio greater than 70% and less than or equal to 80% % OLTV ratio greater than 80% Fixed-rate Variable-rate Dallas Los Angeles Seattle Philadelphia Washington D.C. Atlanta Chicago New York San Francisco Denver
Q3 2023 Financial Supplement 19© 2023 Fannie Mae DRAFT Certain Credit Characteristics of Multifamily Guaranty Book of Business by Acquisition Year, Asset Class, or Targeted Affordable Segment(5) As of September 30, 2023 Acquisition Year Asset Class or Targeted Affordable Segment Categories are not mutually exclusive Overall Book 2008 & Earlier 2009-2019 2020 2021 2022 2023 Conventional /Co-op(34) Seniors Housing(34) Student Housing(34) Manufactured Housing(34) Privately Owned with Subsidy(38) Total UPB (Dollars in billions) $464.7 $5.5 $212.5 $70.4 $66.2 $68.4 $41.7 $413.0 $16.5 $14.0 $21.2 $55.3 % of Multifamily Guaranty Book 100% 1% 46% 15% 14% 15% 9% 89% 4% 3% 5% 12% Loan Count 28,776 1,958 12,443 4,598 3,995 3,535 2,247 25,758 576 562 1,880 3,891 Average UPB (Dollars in millions) $16.1 $2.8 $17.1 $15.3 $16.6 $19.3 $18.6 $16.0 $28.7 $24.9 $11.3 $14.2 Weighted-Average OLTV Ratio 64% 68% 65% 64% 64% 59% 59% 64% 65% 66% 61% 67% Weighted-Average DSCR(36) 2.1 2.1 2.0 2.6 2.4 1.8 1.6 2.1 1.3 1.8 2.2 1.9 % with DSCR < 1.0(36) 3% 5% 5% 2% 1% 1% —% 2% 40% 5% —%* 5% % Fixed rate 90% 21% 92% 95% 92% 79% 99% 92% 62% 80% 93% 86% % Full Interest-Only 41% 33% 34% 39% 41% 54% 64% 43% 14% 33% 39% 29% % Partial Interest-Only(33) 47% 19% 51% 50% 49% 38% 31% 46% 63% 61% 48% 45% % Small Balance Loans(35) 49% 93% 47% 52% 44% 38% 40% 48% 22% 34% 67% 55% % DUS(32) 99% 93% 99% 99% 99% 99% 99% 99% 99% 100% 100% 98% Serious Delinquency Rate(37) 0.54% 0.33% 1.10% 0.14% 0.07% 0.02% —% 0.16% 9.97% 1.40% 0.02% 0.13% % Criticized(41) 8% 12% 9% 4% 6% 13% —%* 6% 57% 9% 3% 10% * represents less than 0.5% Credit Characteristics of Multifamily Guaranty Book of Business $37.9B $28.6B $20.2B $18.2B $13.3B $12.8B $12.0B $11.9B $11.4B $11.2B Share of Book of Business: 38.2% Total Top 10 UPB: $177.5B $0.8B $10.7B $17.6B $32.1B $142.7B $185.7B $75.1B Total UPB: $464.7B UPB by Maturity Year As of September 30, 2023(5) Top 10 MSAs by UPB As of September 30, 2023(5) Certain Credit Characteristics of Guaranty Book(5) New York Dallas Seattle Denver Los Angeles Atlanta Phoenix Washington D.C. Chicago San Francisco 2023 2025 2027 - 2029 2024 2026 2030 - 2032 Other W ei gh te d- Av er ag e D S C R W eighted-Average O LTV R atio 1.9 2.0 2.1 2.2 2.1 66% 66% 65% 64% 64% 2019 2020 2021 2022 Q3 YTD 2023 0.0 1.0 2.0 0% 10% 20% 30% 40% 50% 60% 70% Weighted-Average DSCR(36) Weighted-Average OLTV Ratio
Q3 2023 Financial Supplement 20© 2023 Fannie Mae DRAFT S er io us D el in qu en cy R at e 0.59% 0.24% 0.10% 0.05% 0.07% 0.05% 0.11% 0.06% 0.04% 0.98% 0.42% 0.24% 0.54% 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 Q3 YTD 2023 0.0% 0.2% 0.4% 0.6% 0.8% 1.0% 1.2% 1.4% Multifamily Credit Loss and Serious Delinquency Rates 1.0% 0.3% 0.1% —% * —%* 0.1% 0.7% 0.1% 0.1% 0.2% —%* —% * —% * —%* —%* —% 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 0% 1% Serious Delinquency Rate(37) Cumulative Total Credit Loss Rate, Net by Acquisition Year Through Q3 2023(39) * Represents less than 0.05% of cumulative total credit loss rate, net by acquisition year
© 2023 Fannie Mae DRAFT Endnotes
Q3 2023 Financial Supplement 22© 2023 Fannie Mae DRAFT (1) Other expenses, net are comprised of debt extinguishment gains and losses, expenses associated with legal claims, foreclosed property income (expense), gains and losses from partnership investments, housing trust fund expenses, loan subservicing costs, and servicer fees paid in connection with certain loss mitigation activities. (2) Calculated based upon net worth divided by total assets outstanding at the end of the period. (3) Net amortization income refers to the amortization of premiums and discounts on mortgage loans and debt of consolidated trusts. These cost basis adjustments represent the difference between the initial fair value and the carrying value of these instruments as well as upfront fees Fannie Mae receives at the time of loan acquisition. This excludes the amortization of cost basis adjustments resulting from hedge accounting. (4) Single-family conventional loan population consists of: (a) single-family conventional mortgage loans of Fannie Mae and (b) single-family conventional mortgage loans underlying Fannie Mae MBS other than loans underlying Freddie Mac securities that Fannie Mae has resecuritized. It excludes non-Fannie Mae single-family mortgage-related securities held in the retained mortgage portfolio for which Fannie Mae does not provide a guaranty. Conventional refers to mortgage loans and mortgage-related securities that are not guaranteed or insured, in whole or in part, by the U.S. government or one of its agencies. (5) The multifamily guaranty book of business consists of: (a) multifamily mortgage loans of Fannie Mae; (b) multifamily mortgage loans underlying Fannie Mae MBS; and (c) other credit enhancements that the company provided on multifamily mortgage assets. It excludes non-Fannie Mae multifamily mortgage-related securities held in the retained mortgage portfolio for which Fannie Mae does not provide a guaranty. (6) The average estimated mark-to-market LTV ratio is based on the unpaid principal balance of the loan divided by the estimated current value of the property at period end, which the company calculates using an internal valuation model that estimates periodic changes in home value. Excludes loans for which this information is not readily available. (7) FICO credit score is as of loan origination, as reported by the seller of the mortgage loan. (8) Single-family SDQ rate refers to single-family loans that are 90 days or more past due or in the foreclosure process, expressed as a percentage of the company’s single-family conventional guaranty book of business, based on loan count. Single-family SDQ rate for loans in a particular category refers to SDQ loans in the applicable category, divided by the number of loans in the single-family conventional guaranty book of business in that category. (9) Base guaranty fee income, net of TCCA, is interest income from the guaranty book of business excluding the impact of a 10 basis point guaranty fee increase implemented in 2012 pursuant to the Temporary Payroll Tax Cut Continuation Act of 2011 and as extended by the Infrastructure Investment and Jobs Act, the incremental revenue from which is remitted to Treasury and not retained by the company. (10) "Net interest income from portfolios" consists of: interest income from assets held in the company's retained mortgage portfolio and other investments portfolio; interest income from other assets used to support lender liquidity; and interest expense on the company's outstanding corporate debt and Connecticut Avenue Securities® debt. For purposes of this Financial Supplement chart, income (expense) from hedge accounting is included in the "net interest income from portfolios" category; however, the company does not consider income (expense) from hedge accounting to be a component of net interest income from portfolios. The company had $772 million in hedge accounting expense for the nine months ended September 30, 2023. (11) Reflects the company's aggregate indebtedness at the end of each period presented measured in unpaid principal balance and excludes effects of cost basis adjustments and debt of consolidated trusts. (12) Cash equivalents are composed of overnight repurchase agreements and U.S. Treasuries, if any, that have a maturity at the date of acquisition of three months or less. (13) Refers to the U.S. weekly average fixed-rate mortgage rate according to Freddie Mac's Primary Mortgage Market Survey®. These rates are reported using the latest available data for a given period. (14) U.S. Gross Domestic Product ("GDP") annual growth (decline) rates for periods prior to 2023 are based on the annual "percentage change from fourth quarter to fourth quarter one year ago" calculated by the Bureau of Economic Analysis and are subject to revision. GDP rates for periods in 2023 are the annualized GDP rate based on the Third Quarter 2023 (Advance Estimate) published by the Bureau of Economic Analysis on October 26, 2023. Endnotes
Q3 2023 Financial Supplement 23© 2023 Fannie Mae DRAFT Endnotes (15) Home price estimates are based on purchase transactions in Fannie-Freddie acquisition and public deed data available through the end of September 2023. Including subsequent data may lead to materially different results. Home price growth rate is not seasonally adjusted. UPB estimates are based on data available through the end of September 2023, and the top 10 states are reported by UPB in descending order. One-year home price growth rate is for the 12-month period ending September 30, 2023. (16) Represents, on an annualized basis, the sum of the base guaranty fees charged during the period for the company's single-family conventional guaranty arrangements plus the recognition of any upfront cash payments relating to these guaranty arrangements based on an estimated average life at the time of acquisition. In Q4 2022, the company enhanced the method it uses to estimate average loan life at acquisition. Charged fees reported for prior periods have been updated in this Financial Supplement to reflect this updated methodology. Excludes the impact of a 10 basis point guaranty fee increase implemented pursuant to the TCCA, the incremental revenue from which is remitted to Treasury and not retained by the company. (17) Excludes loans for which this information is not readily available. From time to time, the company revises its guidelines for determining a borrower's DTI ratio. The amount of income reported by a borrower and used to qualify for a mortgage may not represent the borrower's total income; therefore, the DTI ratios reported may be higher than borrowers' actual DTI ratios. (18) Refers to HomeReady® mortgage loans, a low down payment mortgage product offered by the company that is designed for creditworthy low-income borrowers. HomeReady allows up to 97% loan-to-value ratio financing for home purchases. The company offers additional low down payment mortgage products that are not HomeReady loans; therefore, this category is not representative of all high LTV ratio single-family loans acquired or in the single-family conventional guaranty book of business for the periods shown. See the "OLTV Ratio > 95%" category for information on the single-family loans acquired or in the single-family conventional guaranty book of business with origination LTV ratios greater than 95%. (19) "Refi Plus" refers to loans acquired under Fannie Mae's Refi Plus initiative, which offered refinancing flexibility to eligible Fannie Mae borrowers who were current on their loans and who applied prior to the initiative's December 31, 2018 sunset date. Refi Plus had no limits on maximum LTV ratio and provided mortgage insurance flexibilities for loans with LTV ratios greater than 80%. (20) Calculated based on the aggregate unpaid principal balance of single-family loans for each category divided by the aggregate unpaid principal balance of loans in the single-family conventional guaranty book of business. Loans with multiple product features are included in all applicable categories. (21) Consists of loans that are in an active forbearance as of September 30, 2023. (22) Percentage of loans in the single-family conventional guaranty book of business, measured by unpaid principal balance, included in an agreement used to reduce credit risk by requiring collateral, letters of credit, mortgage insurance, corporate guarantees, inclusion in a credit risk transfer transaction reference pool, or other agreement that provides for Fannie Mae's compensation to some degree in the event of a financial loss relating to the loan. (23) Intentionally left blank. (24) Includes mortgage pool insurance transactions covering loans with an unpaid principal balance of $253 million outstanding as of September 30, 2023. (25) Refers to loans included in an agreement used to reduce credit risk by requiring primary mortgage insurance, collateral, letters of credit, corporate guarantees, or other agreements to provide an entity with some assurance that it will be compensated to some degree in the event of a financial loss. Excludes loans covered by credit risk transfer transactions unless such loans are also covered by primary mortgage insurance. (26) Outstanding unpaid principal balance represents the underlying loan balance, which is different from the reference pool balance for CAS and some lender risk-sharing transactions. (27) Based on the unpaid principal balance of the single-family conventional guaranty book of business as of period end. (28) Measured from the borrowers' last paid installment on their mortgages to when the related properties were added to the company's REO inventory for foreclosures completed during the nine months ended September 30, 2023. Home Equity Conversion Mortgages insured by the Department of Housing and Urban Development are excluded from this calculation.
Q3 2023 Financial Supplement 24© 2023 Fannie Mae DRAFT (29) Includes repayment plans and foreclosure alternatives. Repayment plans reflect only those plans associated with loans that were 60 days or more delinquent. Beginning with the year ended December 31, 2020, completed forbearance arrangements are excluded. (30) This chart does not include loans in an active forbearance arrangement, trial modifications, loans to certain borrowers who have received bankruptcy relief and repayment plans that have been initiated but not completed. There were approximately 15,700 loans in a trial modification period that was not complete as of September 30, 2023. (31) Represents the percentage of loans with lender risk-sharing agreements in place, measured by unpaid principal balance. (32) Under the Delegated Underwriting and Servicing ("DUS") program, Fannie Mae acquires individual, newly originated mortgages from specially approved DUS lenders using DUS underwriting standards and/or DUS loan documents. Because DUS lenders generally share the risk of loss with Fannie Mae, they are able to originate, underwrite, close and service most loans without a pre-review by the company. (33) Includes any loan that was underwritten with an interest-only term less than the term of the loan, regardless of whether it is currently in its interest-only period. (34) See https://multifamily.fanniemae.com/financing-options for definitions. Loans with multiple product features are included in all applicable categories. (35) Small balance loans refers to multifamily loans with an original unpaid principal balance of up to $9 million nationwide. Fannie Mae changed its definition of small multifamily loans in Q3 2023 to increase the loan amounts from up to $6 million nationwide to up to $9 million nationwide. The updated definition has been applied to all loans in the current multifamily guaranty book of business, including loans that were acquired under previous small loan definitions. (36) Our estimates of current DSCRs are based on the latest available income information covering a 12 month period, from quarterly and annual statements for these properties including the related debt service. When an annual statement is the latest statement available, it is used. When operating statement information is not available, the underwritten DSCR is used. Co-op loans are excluded from this metric. (37) Multifamily serious delinquency rate refers to multifamily loans that are 60 days or more past due, expressed as a percentage of the company’s multifamily guaranty book of business, based on unpaid principal balance. Multifamily serious delinquency rate for loans in a particular category (such as acquisition year, asset class or targeted affordable segment), refers to seriously delinquent loans in the applicable category, divided by the unpaid principal balance of the loans in the multifamily guaranty book of business in that category. (38) The Multifamily Affordable Business Channel focuses on financing properties that are under an agreement that provides long-term affordability, such as properties with rent subsidies or income restrictions. (39) Cumulative net credit loss rate is the cumulative net credit losses (gains) through September 30, 2023 on the multifamily loans that were acquired in the applicable period, as a percentage of the total acquired unpaid principal balance of multifamily loans that were acquired in the applicable period. Net credit losses include expected benefit of freestanding loss-sharing arrangements, primarily multifamily DUS lender risk-sharing transactions. Credit loss rate for 2014 acquisitions was primarily driven by the write-off of a seniors housing portfolio in Q1 2023. (40) Defaults include loan foreclosures, short sales, sales to third parties at the time of foreclosure and deeds-in-lieu of foreclosure. Cumulative Default Rate is the total number of single-family conventional loans in the guaranty book of business originated in the identified year that have defaulted, divided by the total number of single-family conventional loans in the guaranty book of business originated in the identified year. Data as of September 30, 2023 is not necessarily indicative of the ultimate performance of the loans and performance may change, perhaps materially, in future periods. (41) Criticized loans represent loans classified as "Special Mention," "Substandard" or "Doubtful." Loans classified as "Special Mention" refers to loans that are otherwise performing but have potential weaknesses that, if left uncorrected, may result in deterioration in the borrower’s ability to repay in full. Loans classified as "Substandard" have a well-defined weakness that jeopardizes the timely full repayment. "Doubtful" refers to a loan with a weakness that makes collection or liquidation in full highly questionable and improbable based on existing conditions and values. Endnotes