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Segment Reporting
 12 Months Ended
Dec. 31, 2012
Segment Reporting [Abstract]  
Segment Reporting
Segment Reporting
Our three reportable segments are: Single-Family, Multifamily, and Capital Markets. We use these three segments to generate revenue and manage business risk, and each segment is based on the type of business activities it performs. Under our segment reporting, the sum of the results for our three business segments does not equal our consolidated statements of operations and comprehensive income (loss), as we separate the activity related to our consolidated trusts from the results generated by our three segments. We also include an eliminations/adjustments category to reconcile our business segment financial results and the activity related to our consolidated trusts to net income (loss) in our consolidated statements of operations and comprehensive income (loss).
The section below provides a discussion of the three business segments and how each segment’s financial information reconciles to our consolidated financial statements.
Single-Family
Revenue for our Single-Family business is from the guaranty fees the segment receives as compensation for assuming the credit risk on the mortgage loans underlying single-family Fannie Mae MBS, most of which are held within consolidated trusts, and on the single-family mortgage loans held in our mortgage portfolio. The primary source of profit for the Single-Family segment is the difference between the guaranty fees earned and the costs of providing the guaranty, including credit-related losses.
Our segment reporting presentation differs from our consolidated balance sheets and statements of operations and comprehensive income (loss) in order to reflect the activities and results of the Single-Family segment. The significant differences from the consolidated statements of operations and comprehensive income (loss) are as follows:
•
Guaranty fee income—Guaranty fee income reflects the cash guaranty fees paid by MBS trusts to Single-Family, the amortization of deferred cash fees (both the previously recorded deferred cash fees that were eliminated from our consolidated balance sheets at transition and deferred guaranty fees received subsequent to transition that are currently recognized in our consolidated financial statements through interest income), such as buy-ups, buy-downs, and risk-based pricing adjustments, and the guaranty fees from the Capital Markets group on single-family loans in our mortgage portfolio. To reconcile to our consolidated statements of operations and comprehensive income (loss), we eliminate guaranty fees and the amortization of deferred cash fees related to consolidated trusts as they are now reflected as a component of interest income; however, such accounting continues to be reflected for the segment reporting presentation.
•
Net interest income (loss)—Net interest loss within the Single-Family segment reflects interest expense to reimburse Capital Markets and consolidated trusts for contractual interest not received on mortgage loans, when interest income is no longer recognized in accordance with our nonaccrual accounting policy in our consolidated statements of operations and comprehensive income (loss). Net interest income (loss), also includes an allocated cost of capital charge among the three segments that is not included in net interest income in the consolidated statement of operations and comprehensive income (loss).
Multifamily
The primary sources of revenue for our Multifamily business are guaranty fees the segment receives as compensation for assuming the credit risk on the mortgage loans underlying multifamily Fannie Mae MBS, most of which are held within consolidated trusts, guaranty fees on the multifamily mortgage loans held in our mortgage portfolio, transaction fees associated with the multifamily business and bond credit enhancement fees. Investments in rental and for-sale housing generate revenue and losses from operations and the eventual sale of the assets. While the Multifamily guaranty business is similar to our Single-Family business, neither the economic return nor the nature of the credit risk is similar to that of Single-Family.
Our segment reporting presentation differs from our consolidated balance sheets and statements of operations and comprehensive income (loss) in order to reflect the activities and results of the Multifamily segment. The significant differences from the consolidated statements of operations and comprehensive income (loss) are as follows:
•
Guaranty fee income—Guaranty fee income reflects the cash guaranty fees paid by MBS trusts to Multifamily and the guaranty fees from the Capital Markets group on multifamily loans in Fannie Mae’s portfolio. To reconcile to our consolidated statements of operations and comprehensive income (loss), we eliminate guaranty fees related to consolidated trusts.
•
Gains (losses) from partnership investments—Gains (losses) from partnership investments primarily reflect gains or losses on investments in affordable rental and for-sale housing partnerships measured under the equity method of accounting. To reconcile to our consolidated statements of operations and comprehensive income (loss), we adjust the gains or losses to reflect the consolidation of certain partnership investments.
Capital Markets Group
Our Capital Markets group generates most of its revenue from the difference, or spread, between the interest we earn on our mortgage assets and the interest we pay on the debt we issue to fund these assets. We refer to this spread as our net interest yield. Changes in the fair value of the derivative instruments and trading securities we hold impact the net income or loss reported by the Capital Markets group. The net income or loss reported by our Capital Markets group is also affected by the impairment of AFS securities.
Our segment reporting presentation differs from our consolidated balance sheets and statements of operations and comprehensive income (loss) in order to reflect the activities and results of the Capital Markets group. The significant differences from the consolidated statements of operations and comprehensive income (loss) are as follows:
•
Net interest income—Net interest income reflects the interest income on mortgage loans and securities owned by Fannie Mae and interest expense on funding debt issued by Fannie Mae, including accretion and amortization of any cost basis adjustments. To reconcile to our consolidated statements of operations and comprehensive income (loss), we adjust for the impact of consolidated trusts and intercompany eliminations as follows:
•
Interest income: Interest income consists of interest on the segment’s interest-earning assets, which differs from interest-earning assets in our consolidated balance sheets. We exclude loans and securities that underlie the consolidated trusts from our Capital Markets group balance sheets. The net interest income reported by the Capital Markets group excludes the interest income earned on assets held by consolidated trusts. As a result, we report interest income and amortization of cost basis adjustments only on securities and loans that are held in our portfolio. For mortgage loans held in our portfolio, when interest income is no longer recognized in accordance with our nonaccrual accounting policy, the Capital Markets group recognizes interest income for reimbursement from Single-Family and Multifamily for the contractual interest due under the terms of our intracompany guaranty arrangement.
•
Interest expense: Interest expense consists of contractual interest on the Capital Markets group’s interest-bearing liabilities, including the accretion and amortization of any cost basis adjustments. It excludes interest expense on debt issued by consolidated trusts. Therefore, the interest expense recognized on the Capital Markets group income statement is limited to our funding debt, which is reported as “Debt of Fannie Mae” in our consolidated balance sheets. Net interest expense also includes an allocated cost of capital charge among the three business segments that is not included in net interest income in our consolidated statements of operations and comprehensive income (loss).
•
Investment gains or losses, net—Investment gains or losses, net reflects the gains and losses on securitizations and sales of available-for-sale securities from our portfolio. To reconcile to our consolidated statements of operations and comprehensive income (loss), we eliminate gains and losses on securities that have been consolidated to loans.
•
Fair value gains or losses, net—Fair value gains or losses, net for the Capital Markets group includes derivative gains and losses, foreign exchange gains and losses, and the fair value gains and losses on certain debt securities in our portfolio. To reconcile to our consolidated statements of operations and comprehensive income (loss), we eliminate fair value gains or losses on Fannie Mae MBS that have been consolidated to loans.
•
Other expenses, net—Debt extinguishment gains or losses recorded on the segment statements of operations relate exclusively to our funding debt, which is reported as “Debt of Fannie Mae” in our consolidated balance sheets. To reconcile to our consolidated statements of operations and comprehensive income (loss), we include debt extinguishment gains or losses related to consolidated trusts to arrive at our total recognized debt extinguishment gains or losses.
Segment Allocations and Results
Our business segment financial results include directly attributable revenues and expenses. Additionally, we allocate to each of our segments: (1) capital using FHFA minimum capital requirements adjusted for over- or under-capitalization; (2) indirect administrative costs; and (3) a provision or benefit for federal income taxes. In addition, we allocate intracompany guaranty fee income as a charge from the Single-Family and Multifamily segments to Capital Markets for managing the credit risk on mortgage loans held by the Capital Markets group.
The following tables display our business segment financial results for the years ended December 31, 2012, 2011 and 2010.
 
For the Year Ended December 31, 2012
 
Business Segments
 
Other Activity/Reconciling Items
 
 
 
 
Single-Family
 
Multifamily
 
Capital Markets
 
Consolidated Trusts(1)
 
Eliminations/ Adjustments(2)
 
Total Results
 
 
(Dollars in millions)
 
Net interest (loss) income
$
(790
)
 
 
$
(13
)
 
 
$
13,241

 
 
$
7,156

 
 
 
$
1,907

(3) 

$
21,501

 
Benefit for credit losses
672

 
 
180

 
 
—

 
 
—

 
 
 
—

 
 
852

 
Net interest (loss) income after benefit for credit losses
(118
)
 
 
167

 
 
13,241

 
 
7,156

 
 
 
1,907

 
 
22,353

 
Guaranty fee income (expense)
8,151

 
 
1,040

 
 
(1,291
)
 
 
(4,737
)
(4) 

 
(2,951
)
(4) 

212

(4) 
Investment gains (losses), net
8

 
 
37

 
 
6,217

 
 
(1
)
 
 
 
(5,774
)
(5) 

487

 
Net other-than-temporary impairments
—

 
 
—

 
 
(711
)
 
 
(2
)
 
 
 
—

 
 
(713
)
 
Fair value losses, net
(8
)
 
 
—

 
 
(3,041
)
 
 
(313
)
 
 
 
385

(6) 

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

 
 
—

 
 
(277
)
 
 
33

 
 
 
—

 
 
(244
)
 
Gains from partnership investments
—

 
 
123

 
 
—

 
 
—

 

 
(4
)
 
 
119

(7) 
Fee and other income (expense)
759

 
 
207

 
 
717

 
 
(395
)
 

 
(13
)
 
 
1,275

 
Administrative expenses
(1,590
)
 
 
(269
)
 
 
(508
)
 
 
—

 
 
 
—

 
 
(2,367
)
 
Foreclosed property income
247

 
 
7

 
 
—

 
 
—

 
 
 
—

 
 
254

 
Other expenses
(1,079
)
 
 
(5
)
 
 
(22
)
 
 
—

 

 
(73
)
 
 
(1,179
)
 
Income before federal income taxes
6,370

 
 
1,307

 
 
14,325

 
 
1,741

 
 
 
(6,523
)
 
 
17,220

 
(Provision) benefit for federal income taxes
(80
)
 
 
204

 
 
(124
)
 
 
—

 
 
 
—

 
 
—

 
Net income
6,290

 
 
1,511

 
 
14,201

 
 
1,741

 
 
 
(6,523
)
 
 
17,220

 
Less: Net loss attributable to noncontrolling interest
—

 
 
—

 
 
—

 
 
—

 
 
 
4

(8) 
 
4

 
Net income attributable to Fannie Mae
$
6,290

 
 
$
1,511

 
 
$
14,201

 
 
$
1,741

 
 
 
$
(6,519
)
 
 
$
17,224

 

 
For the Year Ended December 31, 2011
 
Business Segments
 
Other Activity/Reconciling Items
 
 
 
 
Single-Family
 
Multifamily
 
Capital Markets
 
Consolidated Trusts(1)
 
Eliminations/ Adjustments(2)
 
Total Results
 
 
(Dollars in millions)
 
Net interest (loss) income
$
(2,411
)
 
 
$
(38
)
 
 
$
13,920

 
 
$
5,765

 
 
 
$
2,045

(3) 
 
$
19,281

 
Provision for credit losses
(26,453
)
 
 
(265
)
 
 
—

 
 
—

 
 
 
—

 
 
(26,718
)
 
Net interest (loss) income after provision for credit losses
(28,864
)
 
 
(303
)
 
 
13,920

 
 
5,765

 
 
 
2,045

 
 
(7,437
)
 
Guaranty fee income (expense)
7,507

 
 
884

 
 
(1,497
)
 
 
(4,486
)
(4) 
 
 
(2,181
)
(4) 
 
227

(4) 
Investment (losses) gains, net
(2
)
 
 
18

 
 
3,711

 
 
(315
)
 
 
 
(2,906
)
(5) 
 
506

 
Net other-than-temporary impairments
—

 
 
—

 
 
(306
)
 
 
(2
)
 
 
 
—

 
 
(308
)
 
Fair value losses, net
(7
)
 
 
—

 
 
(6,596
)
 
 
(226
)
 
 
 
208

(6) 
 
(6,621
)
 
Debt extinguishment (losses) gains, net
—

 
 
—

 
 
(254
)
 
 
22

 
 
 
—

 
 
(232
)
 
Gains from partnership investments
—

 
 
81

 
 
—

 
 
—

 
 
 
—

 
 
81

(7) 
Fee and other income (expense)
579

 
 
218

 
 
478

 
 
(329
)
 
 
 
(10
)
 
 
936

 
Administrative expenses
(1,638
)
 
 
(264
)
 
 
(468
)
 
 
—

 
 
 
—

 
 
(2,370
)
 
Foreclosed property expense
(765
)
 
 
(15
)
 
 
—

 
 
—

 
 
 
—

 
 
(780
)
 
Other (expenses) income
(857
)
 
 
25

 
 
(34
)
 
 
—

 
 
 
(81
)
 
 
(947
)
 
(Loss) income before federal income taxes
(24,047
)
 
 
644

 
 
8,954

 
 
429

 
 
 
(2,925
)
 
 
(16,945
)
 
Benefit (provision) for federal income taxes
106

 
 
(61
)
 
 
45

 
 
—

 
 
 
—

 
 
90

 
Net (loss) income attributable to Fannie Mae
$
(23,941
)
 
 
$
583

 
 
$
8,999

 
 
$
429

 
 
 
$
(2,925
)
 
 
$
(16,855
)
 

 
For the Year Ended December 31, 2010
 
Business Segments
 
Other Activity/Reconciling Items
 
 
 
 
Single-Family
 
Multifamily
 
Capital Markets
 
Consolidated Trusts(1)
 
Eliminations/ Adjustments(2)
 
Total Results
 
 
(Dollars in millions)
 
Net interest (loss) income
$
(5,386
)
 
 
$
3

 
 
$
14,321

 
 
$
5,073

 
 
 
$
2,398

(3) 
 
$
16,409

 
Provision for credit losses
(24,740
)
 
 
(156
)
 
 
—

 
 
—

 
 
 
—

 
 
(24,896
)
 
Net interest (loss) income after provision for credit losses
(30,126
)
 
 
(153
)
 
 
14,321

 
 
5,073

 
 
 
2,398

 
 
(8,487
)
 
Guaranty fee income (expense)
7,206

 
 
791

 
 
(1,440
)
 
 
(4,525
)
(4) 
 
 
(1,830
)
(4) 
 
202

(4) 
Investment gains (losses), net
9

 
 
6

 
 
4,047

 
 
(418
)
 
 
 
(3,298
)
(5) 
 
346

 
Net other-than-temporary impairments
—

 
 
—

 
 
(720
)
 
 
(2
)
 
 
 
—

 
 
(722
)
 
Fair value gains (losses), net
—

 
 
—

 
 
239

 
 
(155
)
 
 
 
(595
)
(6) 
 
(511
)
 
Debt extinguishment losses, net
—

 
 
—

 
 
(459
)
 
 
(109
)
 
 
 
—

 
 
(568
)
 
Losses from partnership investments
—

 
 
(70
)
 
 
—

 
 
—

 
 
 
(4
)
 
 
(74
)
(7) 
Fee and other income (expense)
306

 
 
146

 
 
519

 
 
(88
)
 
 
 
(1
)
 
 
882

 
Administrative expenses
(1,628
)
 
 
(384
)
 
 
(585
)
 
 
—

 
 
 
—

 
 
(2,597
)
 
Foreclosed property expense
(1,680
)
 
 
(38
)
 
 
—

 
 
—

 
 
 
—

 
 
(1,718
)
 
Other (expenses) income
(836
)
 
 
(68
)
 
 
125

 
 
—

 
 
 
(74
)
 
 
(853
)
 
(Loss) income before federal income taxes
(26,749
)
 
 
230

 
 
16,047

 
 
(224
)
 
 
 
(3,404
)
 
 
(14,100
)
 
Benefit (provision) for federal income taxes
69

 
 
(14
)
 
 
27

 
 
—

 
 
 
—

 
 
82

 
Net (loss) income
(26,680
)
 
 
216

 
 
16,074

 
 
(224
)
 
 
 
(3,404
)
 
 
(14,018
)
 
Less: Net loss attributable to noncontrolling interest
—

 
 
—

 
 
—

 
 
—

 
 
 
4

(8) 
 
4

 
Net (loss) income attributable to Fannie Mae
$
(26,680
)
 
 
$
216

 
 
$
16,074

 
 
$
(224
)
 
 
 
$
(3,400
)
 
 
$
(14,014
)
 
__________
(1) 
Represents activity related to the assets and liabilities of consolidated trusts in our consolidated balance sheets.
(2) 
Represents the elimination of intercompany transactions occurring between the three business segments and our consolidated trusts, as well as other adjustments to reconcile to our consolidated results.
(3) 
Represents the amortization expense of cost basis adjustments on securities that we own in our portfolio that on a GAAP basis are eliminated.
(4) 
Represents the guaranty fees paid from consolidated trusts to the Single-Family and Multifamily segments. The adjustment to guaranty fee income in the Eliminations/Adjustments column represents the elimination of the amortization of deferred cash fees related to consolidated trusts that were re-established for segment reporting. Total guaranty fee income is included in fee and other income in our consolidated statements of operations and comprehensive income (loss).
(5) 
Primarily represents the removal of realized gains and losses on sales of Fannie Mae MBS classified as available-for-sale securities that are issued by consolidated trusts and retained in the Capital Markets portfolio. The adjustment also includes the removal of securitization gains (losses) recognized in the Capital Markets segment relating to portfolio securitization transactions that do not qualify for sale accounting under GAAP.
(6) 
Represents the removal of fair value adjustments on consolidated Fannie Mae MBS classified as trading that are retained in the Capital Markets portfolio.
(7) 
Gains (losses) from partnership investments are included in other expenses in our consolidated statements of operations and comprehensive income (loss).
(8) 
Represents the adjustment from equity method accounting to consolidation accounting for partnership investments that are consolidated in our consolidated balance sheets.
The following table displays total assets by segment as of December 31, 2012 and 2011.
 
As of December 31,
 
2012
 
2011
 
(Dollars in millions)
Single-Family
$
17,595

 
$
11,822

Multifamily
5,182

 
5,747

Capital Markets
723,217

 
836,700

Consolidated trusts
2,749,571

 
2,676,952

Eliminations/adjustments
(273,143
)
 
(319,737
)
Total assets
$
3,222,422

 
$
3,211,484


We operate our business solely in the United States and its territories, and accordingly, we generate no revenue from and have no assets in geographic locations other than the United States and its territories.